It’s such a difficult concept to argue against: freedom. For some you just need to picture Mel Gibson with blue face paint screaming the word and it’s “case closed”. Freedom encapsulates the abolition of slavery, the granting of the right to vote to all men and women, the rights and freedoms we have to speak out on any issue. It’s such a difficult term to argue against.
Politicians know this, which is probably why the recent pension reforms have been called “pension freedom”. Who on earth would argue against that?
May I once more unquietly raise my hand to speak out?
You see not all freedom is good. We rightly accept curtailment on our freedoms every day in the interests of protection and the greater benefit of society. I can’t carry a bottle of “Dr Pepper zero” through airport security – as I learned to my cost the other day. My freedom to take the juice through was curtailed in the interests of security. We don’t allow people to freely drink and drive in the interests of safety, and we have several curtailments on freedom of speech and expression in the interests of public order and decency.
Sometimes freedom isn’t all that it’s cracked up to be; sometimes it’s positively dangerous.
Consider a fence at a holiday safari park. Is that fence there to curtail your freedom to roam wherever you like? Or is it there to keep the predators out? You can stand at the fence with a blue painted face shouting freedom all you want but no one in their right mind is going to let you wander freely amongst the predators in the interests of preserving your right to roam.
It’s here that I have the biggest issue with pension freedom. Right now consider people’s pensions fenced in a huge encampment with many paths and facilities to take you almost anywhere you like? This is the financial services community watched over by the FCA. Now the FCA and its previous incarnations have rightly come in for a lot of criticism lately but no one is seriously suggesting that the solution would be to take down all the fences. At the heart of the FCA’s protection are the principles of treating customers fairly and the consumer friendly Ombudsman Service.
Right now, whenever a pensioner wanders he or she is at least given some form of protection and accessible redress. Pension freedom will change all that. Pensioners will be able to take all of their pension pot and freely walk outside the protection gates of the FCA, to wander freely amongst the predators.
I’m fully aware that this sounds alarmist but there are unscrupulous predatory salespeople out there bent on doing nothing more than separating people from their capital. One only need glance at the FCA’s warning pages to identify a large number of companies that the FCA cannot regulate or do anything about which are clearly a risk to any pensioner wandering around with their money.
We’ve seen this all happen before. Pension transfer mis-selling was a shameful blight on the industry and led to many of the consumer protections that we have today. In my own time offshore in jurisdictions where consumers have no protection at all, I’ve seen some frankly shocking investments which were nothing short of a Ponzi scheme and others which were clearly designed against the client and in favour of the salesman.
With the recent DWP guidance recently sneaked out by the government on the last day of Parliament, the capacity of this change to do serious and irreparable harm to some people is inevitable.
The phrase “pension freedom” sounds catchy and is difficult to argue against. But so was Labour’s freedom-friendly light touch prudential regulation of the financial services industry in the early 2000s. At the time you’d find no one arguing against it, but of course now everyone is quick to point the finger of blame. It will be the same with pension freedom in time.
I have to say I – almost – resent being seen as a continual merchant of doom on this subject. Like a minister preaching from the Book of Revelations to a happy congregation, worse is when the eventual apocalypse comes for no one wants to hear “I told you so”.
Amidst all the joy and hype of pension freedom we need more people, who know better, to sound a note of caution. Neither I nor the FCA can stop people walking outside of the fence into the hands of predatory salespeople but I do hope they at least hear the sermon before doing so.