Don’t Believe EVERYTHING You Read
Posted by siteadmin on Friday 19th June 2015.
It’s now almost three months since the much heralded Pension Freedoms legislation took effect introduced by George Osborne.
As predicted by me and others in the financial industry we’re now hearing and seeing reports in the media from confused, concerned and angry people who are keen to experience the ‘freedom’ of accessing their pension pots.
I must admit some of the coverage has left me feeling the same because it is so often wide of the mark and wrongly is giving the industry a bad name.
Just a few of these claims in the media include:-
- Firms refusing withdrawals for fear of negligence claims in years to come;
- Savers being forced to pay up to £1,000 for advice to access their money;
- Delays of up to 90 days in paying out cash;
I don't doubt that these incidents have happened but there are reasons why and those reasons are not getting reported but also need to be understood.
I’ll address each one separately.
Firstly, firms have a duty of care and the concern within the industry is that if they haven’t done everything by the book they’ll leave themselves open for PPI type claims in the future. I don’t see it as companies being obstructive and difficult, more like careful and ultimately ensuring things are done properly. There is a regulatory process and it has to be followed.
Secondly, at a modest level and to access your pension pot you need to have an adviser review your situation, your requirements and your future plans to then deem the action suitable. The figure of £1,000 didn't mention that there’s a lot of work involved here for the financial advisory firm to meet in line with their regulatory obligations whilst reviewing and responding to the client’s requests. It’s not simply a case of signing a form and away you go.
Think of it this way when you go into a chemist you can buy off the shelf remedies. But for more powerful cures you need to speak to the pharmacist and benefit from their expertise to get ‘behind the counter’ products. Some things you can only get via prescription. There's an obvious reason for that where some medications are just too dangerous to self-prescribe and thus, it's not possible to do so.
I broke my ankle last year and as a by-product developed a small blood clot. The medical team were fantastic. As a result, I was on warfarin for three months which is as many of you will know is a very dangerous drug and one Doctors monitor very carefully.
Thirdly (although there have been a lot more claims than the three mentioned here), Mr Osborne famously said that he wanted people to be able to access their pensions similar to the way you take money out of a bank’s ATM. A nice idea but it’s nowhere near as simple as that, hence some of the ‘delays’.
As many of us have experienced, if we want to use the latest Smartphone technology we'll probably need to upgrade our device if our current one isn't up to scratch.
In this instance, people are swapping from one pension company to another which involves differing systems, communications between all parties concerned and has to be done 100 per cent correctly meaning time and care needs to be taken. Again just like when an adviser reviews the client’s situation, there’s a lot of behind the scenes work that needs to be undertaken.
Finally, the problem I have with the majority of the media coverage is a lot of people take what’s reported as advice. It’s not. For that you need to go to a professional. The media are not and are not qualified to advise.