Stark warning issued over government's pension reforms

Consumer dangers inherent in the government's pension reforms have never been spelt out in such a considered, authoritative and stark way.

The changes, starting on April 6th, will lead some people to rundown their retirement savings "in days and months, rather than years", according to some.

Head of the Financial Conduct Authority, Martin Wheatley, said: "Some savers, come 55, will invariably head to Las Vegas, buy fast cars...Indeed Saga seems to have suggested that cruise bookings have already risen by some 8% ahead of April".

Beneath the lighthearted language, this is an urgent warning.

A raft of polls and surveys will be out in coming weeks which will show that a large proportion of savers will cash-in their pension pots early.

Meanwhile there are worrying doubts about the quality of advice and guidance that people will get ahead of such potentially life changing decisions.

One pension company executive I spoke to today said there is a risk of an "ice bucket challenge" where people stampede to do something that looks good but which actually leaves them cripplingly short of money in later life.

Speaking at the National Association of Pension Funds investment conference in Edinburgh, Mr Wheatley also warned about the dangers of pension frauds and scams in light of the new freedoms.

He said: "One of the most important risks is the possibility that some customers in this first tranche to benefit from the new freedoms, will be targeted by criminal enterprise.

"Scams and fraud, we know, tend to proliferate at the moment of maximum uncertainty.

“Or the possibility that firms target consumers, before they hit 55, with pension liberation scams, persuading them to access their money before the rules allow access.

"A particular risk, given that many of those approaching retirement today will – unlike their parents’ generation – be carrying debts with them."