Thousands of British pensioners are facing the stark reality of ‘financial ruin’ just four weeks into the new Pensions Scheme Act, experts have warned.
Rushed decisions and poor advice is threatening the long-term financial security of pension savers, suddenly gifted the opportunity by the government to raid their pension pots.
Experts at Greyfriars Asset Management LLP, say pension enquires have soared by a staggering 50% since the new pension freedoms came into force.
Desperate savers have called the wealth management company, concerned that they may have made a rash decision in withdrawing cash from their pension savings.
The company has warned of emerging ‘horror stories’ from savers who have swindled their life savings, or people facing the prospect of huge tax bills.
Gareth Roberts, Partner and Head of Advice at Greyfriars Asset Management LLP said: “Our worst fears appear to be coming true. We are just four weeks into pensions freedoms and already we have been privy to horror stories of life savings being lost in the blink of an eye.”
“The industry warned savers to be calm, the FCA and Pension Wise urged caution and yet every day rash choices, a failure to explore options and uninformed decisions are resulting in serious harm.
“Tragically for too many, once the decision has been made, it is too late to go back and life savings are gone, or locked into products that are simply unsuitable.”
“Gaining professional advice can save clients money in the long-term. Simply using online information doesn’t cut it, we encourage individuals to think carefully about getting the best chance to use pensions wisely as it can be done.
“This is all encompassing, without the right knowledge, people are susceptible to getting stung heavily on tax, we’ve already seen it first hand.
“We support the objective of the pension freedoms and believe this allows for pensioners to maximise their savings, however many will make the wrong, often irrecoverable decisions about their retirement which will result in poor outcomes without the right advice”
Pension changes were introduced by Chancellor George Osborne on April 6th, 2015. The move allowed savers to withdraw or invest part, or all, of the pension savings in response to calls to outlaw or axe annuities.
Mr Osborne, said: “This government believes in the principle of freedom. Individuals who have worked hard and saved responsibly throughout their adult life should be trusted to make their own decisions with their pension savings.”
“I believe that people should be free to make their own choice about how to use their savings. These reforms create more choices for individuals, and we want people to equipped and ready to make informed decisions.”
Opponents have argued that the new freedoms could cause confusion, with some experts fearing up to £6 billion could be withdrawn in the first four months alone.
Mr Roberts, added: “Pension freedoms brings greater choice and opportunity but with so many options it is far easier for individuals to make costly mistakes. Hence it is crucial to seek professional advice.
“Over 50% of people planning to retire will do so without any advice on how to best maximise their pension and the consequences could leave many in serious financial harm in later years.”
Experts also fear for pension savers being approached by criminals and con-men, who are targeting pensioners with scams and promises of lucrative investment opportunities.
Prior to the introduction of the new pension freedoms, FCA Chief Executive Martin Wheatley warned: “There is rightly, a broad and important responsibility here on the FCA to protect consumers across the arc of adulthood: from first contribution to final pension payment.”
“One of the most important risks is the possibility that some customers in this first tranche to benefit from the new freedoms, will be targeted by criminal enterprise. Scams and fraud, we know, tend to proliferate at the moment of maximum uncertainty.”
That advice was later echoed by Citizens Advice, who released a report which included the tragic story of one pensioner who lost £200,000 to a pension scammer.
The report included a further 150 reported cases of pensioners scammed and cheated out of their life savings.
Mr Roberts said: “With our help, retirees can enjoy their retirement and really benefit from the new pension freedoms.
“In many ways, pension structures should now be viewed as a family wealth trust and therefore could be designed to pass significant wealth down the generations, rather than simply eroded as a vehicle for retirement income or long-term care costs.”