It’s a Mad, Mad, Mad, Mad World is a 1963 American comedy film about the madcap pursuit of $350,000 in stolen cash by a diverse group of strangers.
The government has estimated that up to 540,000 people over 55 will be able to take advantage of the new pension flexibilities being introduced on 6 April. These people will have the option to take their pension benefits in cash (subject to paying any appropriate tax) instead of buying an annuity. The reforms, announced in the Budget of March 2014, are being rushed in this April despite warnings from the industry that the timescale is too short. This is presumably because the coalition government wants to get the reforms in place before the May election. Let me make my position clear by saying I am generally in favour of the radical reforms being proposed by the government, just skeptical about the speed in which they are being introduced.
Having rushed the reforms through, the Pensions Minister has advised those able to use the new flexibilities to “take a big deep breath on the sixth of April” and give it a few months until the summer or autumn before using the flexibilities. He suggests delay will be in the interest of the vast majority of people to allow the market to develop new products and variations. This begs the question why the reforms are being rushed through without giving the market time to develop the new products and variations before the changes come into force.
As part of the new reforms, the government has promised a free guidance session, marketed as Pension Wise, for those able to use the new flexibilities. Pension Wise will be provided face-to-face or via the telephone to help people understand their options. The Citizens Advice Bureau will be responsible for face-to-face sessions with the Pensions Advisory Service manning the telephones. It seems currently only about 244 staff have been recruited to deal with a possible 540,000 queries and, at least until the last few days, those affected were still not able to book appointments.
The Pensions Minister says his biggest fear is people falling prey to pension scams after they have accessed their money. He describes “a spectrum from outright crooks, where you will never see your money again (….) to investments that are rather higher risk than you realise”. Proposed hotel developments in exotic locations are presumably one example. If it is suggested you take your money out of your pension and invest it in exotic locations at eye watering returns, doing so may well mean your eyes water for a different reason in due course. Barely a day passes without us seeing someone else fall for what is such an obvious scam.
So, if the best advice for the vast majority of the 540,000 is to wait for six months, and the crooks are queueing up to steal the cash from the unwary, and the industry is still preparing the products needed to make the reforms a success, and those giving the free guidance are not ready, why are we letting the date of a general election dictate racing the reforms through! It truly is a Mad, Mad, Mad, Mad World!
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