Former shadow chancellor Ed Balls has warned Philip Hammond the popularity of defined benefit (DB) pension transfers has ‘mis-selling potential’, in an exclusive interview with New Model Adviser®.
Balls delivered a stark warning about the impact of pension freedom reforms on DB schemes following his appearance at last week's New Model Adviser® conference in London.
‘In the last few months, and as New Model Adviser® has been highlighting, these cases of DB transfers driven by those freedoms, you’ve seen what looks like potential mis-selling. And what we have known from the past is when you have had a mis-selling scandal that has the potential to blight the industry and people’s propensity to save for quite a long time.’
Balls, who served as economic secretary to the Treasury in Tony Blair’s government, said current chancellor Hammond should keep a very close watch on the final salary transfer market.
‘In the end if there is a scandal and the scandal is a product of the regulatory and tax regime all of that will come back to the chancellor and the Treasury, and its parliament’s job to hold the government to account. So my advice would be if he has not got anyone working on this today he should tomorrow.’
When asked on another one of Osborne’s controversial savings reforms, the lifetime ISA which was introduced last year, Balls said this was a ‘confused’ project.
‘I think the problem with the lifetime ISA is it is again out of the blue, there hadn’t been any consultation,' he said.
'It was clear Osborne was trying to tax support people to save for homes but he put it into a language like he might also be a pension and is it the right choice for relative to pension products on offer. From the beginning it was always be a bit confused and the evidence so far is the take up has been quite low so I think this has got gimmick written all over it.’