A major pensions scandal is being overlooked by the authorities, who have thrown savers to the wolves instead of protecting them.
As Money Mail reveals here, our big pension providers have been caught helping themselves to oodles of our cash when they think nobody’s watching.
Sound familiar? It should do.
In the Eighties and Nineties, we exposed insurers for mis-selling personal pensions to people who should never have bought one. In the 2000s, we campaigned against firms flogging shoddy annuities to customers in poor health.
Now, just when you thought the bad old days were over, savers are being stung with huge fees when they dip into their pots using the new retirement freedoms.
Pensioners can loose £13,500 from their £100,000 savings pot by choosing the incorrect plan
And, just like before, loyal customers are most at risk. Figures from watchdog the Financial Conduct Authority, which privately admits it is worried about what’s going on, show that 94 per cent of the so-called drawdown plans sold without advice go to pension companies’ existing customers.
This type of policy has become the new normal for accessing your pension in retirement. It lets you treat your fund like a cash machine, taking (or in the jargon ‘drawing down’) a regular income while your money stays invested in stocks, cash and bonds.
Already, 250,000 people have moved money into these plans since the 2015 pension reforms. I expect this number to soar.
It’s vital that the costs are fair. Yet the amount you could miss out on by failing to shop around for the best deal – £13,500 from a £100,000 savings pot – makes small beer of the losses to savers when they were sold the wrong annuities in the 2000s.
A common theme runs through these pension scandals: the ponderous, half-hearted response from the regulator in charge. This time, it should act with urgency.
The key to drawing an income in retirement is getting a plan that suits your needs. The FCA must find a way to get more people to swap providers – or thousands will run out of cash in old age.
But the watchdog should also realise that charges aren’t everything. A more costly plan might be just what you need. For example, you could be paying extra for a fund that’ll safeguard your pot from a stock-market crash or alter your investments as you age.
But, crucially, paying extra should be YOUR decision – not the result of opportunistic tactics by pension firms. We can’t have providers rolling customers into expensive plans by default.
Given the minefield of pension choices on retirement, I wouldn’t dare dip into my pot without first talking to a financial adviser.
Love them or loathe them, I suggest you do the same.
Shame on Equifax
Equifax should be punished for its shameful handling of the data breach it suffered in May.
It discovered the attack in July, yet waited until September to tell the public. The firm has taken another month to start alerting victims. Now we learn 15 million were affected, not the 400,000 it first claimed. Worse still, Equifax is writing to just 700,000 of them.
Such prevarication has put millions at risk of fraud unnecessarily. This from a firm that’s made a fortune as an ID theft ‘expert’. The information watchdog should investigate and the victims of the scandal must be compensated.
In the meantime, change all your online passwords – it’s not worth taking any chances.
Game of cards
Back in July, the Government announced a ban on the rip-off card fees imposed by shops, airlines and town halls.
The culprits, who pocket about £500 million a year by charging up to 3 per cent if you pay by credit card, had until January to change this.
And, wouldn’t you know it, most seem to be waiting to the very last moment and raking in as much as possible before the game is up.
I have been charged several times since summer’s announcement, most recently when buying RAC insurance.
If you’ve come across firms still charging for card use despite being told it’s not on, tell me.