“Freedom is not worth having if it does not include the freedom to make mistakes.”
― Mahatma Gandhi
The quote above from Mahatma Ghandi sums up a lot of the issues that are currently arising from the advent of pension freedom in April 2015. The concept of trusting people to decide themselves how to handle their money is an exhilarating one when one compares it to the staid, over-regulated financial advice world that existed up to this point. But now that we are getting into the nitty gritty of the actual implementation of those freedoms, it is appears that the regulators are finding it very difficult to avoid getting involved in order to protect people from themselves.
The problem is that despite all the efforts in terms of guidance and the regulations surrounding the provision of advice by Independent Financial Advisers, the concept of protecting the consumers from sharks in the world of finance is still overwhelmingly prevalent. Thousands of hours’ worth of copy has been written in an effort to decide where the responsibility lies if the consumer decides to do something with their pension savings which ultimately doesn’t turn out well for them. Financial services is the one area where ‘caveat emptor’ doesn’t seem to apply.
The Financial Services Ombudsman recently stated that it was reasonable for a SIPP provider to refuse to accept a transfer from a defined benefit scheme even though the financial adviser had recommended the transfer. This can’t be right. Blocking them is infantilising the individual and telling them they have to abide by the views of the pension provider, an approach that is the exact opposite is the idea of the consumer knows best which was so touted at the beginning of the pension’s freedom process.
The end result is that the consumer is being prevented from doing what they want to do with their own money because somebody somewhere is telling them that they are not smart enough to make their own decisions. This is after getting advice and a document laying out the pros and cons of their decision.
Is this what we meant by the granting of pension freedoms? Are the regulators playing fast and loose with the providers and the advisers, in order to maintain control over an area where they have been specifically told to back off? It is hard to believe that this is what is meant by the Chancellor when he granted the freedoms, but so wary are the regulators about being seen to be presiding over a future scandal that they are ignoring the intent of the changes and focusing on where they can intervene to make sure that the consumer doesn’t lose out. This is not their remit.
If freedom means anything, it is the freedom to make mistakes, not the freedom to choose the option that somebody else believes you should. We need to guard against the choice being given to retirees becoming the same as that given to electors in North Korea, i.e. you can make any selection from this list of one. Freedom assumes that the individual is taking responsibility for the decision, which means that the regulators should back off and redefine their role, which is to ensure offerings to the consumer are not scams rather than trying to coerce consumers into buying the products that the regulator believes they should have. Let freedom reign.
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