New pension freedoms are designed to put you in control of your money, but some pension providers may prevent you from taking advantage of them, as this reveals.
Is Another Mis-Selling Scandal Brewing, This Time Over Pension Freedoms?
Despite Pension Legislation Allowing It, Incredibly, Pension Providers Are Under No Legal Obligation To Offer You All Of The Pension Freedoms
It's been estimated that around five million pension holders could be affected by Friends Life's U-turn on pension freedoms.
Friends Life has dropped plans to allow savers to take as much money out of their pensions as they want after age 55, saying the changes are too complex. According to an article on pension freedoms in The Telegraph, policyholders have three options: (i) cash the entire pension in one go; (ii) swap the whole fund for a lifetime annuity; (iii) transfer the pension to another provider.
A Friends Life spokesman told the paper the company had intended to offer flexible drawdown but changed its mind because of the “older and complex” nature of its pension business, which would require “a lot of manual and time consuming work”. He went to say: “We apologise to those customers who wish to partially withdraw their savings through the new pension freedoms as we are not offering this service at the moment. We are planning to offer partial withdrawals in due course.”
What Pension Freedoms Will You Have Access To?
Complaints Are Mounting Over Pension Freedoms
In the first couple of months of pension freedoms, a Freedom of Information request submitted by Money Marketing shows the Financial Ombudsman Service has received 232 enquiries relating to pension freedoms.
Almost all of the enquiries express dissatisfaction with the way pension providers are offering access to pension freedoms. Half of the enquiries relate to delays and poor service, with many consumers complaining forms have taken weeks to arrive and providers have repeatedly moved back the date their tax free cash will be paid.
Incredibly, 13 per cent of the enquiries are from consumers who have been told by their provider they must take advice, but have been unable to find an adviser willing to help them, preventing them from accessing their money!
Government Vows To Name And Shame Over Pension Freedom Failures
As a consequence of members of the House of Lords hitting out at the Government’s failure to intervene on ‘ridiculously high’ drawdown charges, it’s considering plans to install a cap on ‘excessive’ pension exit charges.
George Osborne said: “There are clearly concerns that some companies are not doing their part to make those freedoms available, and we are investigating how to remove barriers. We are considering now a cap on charges and have asked the FCA to investigate. People who have worked hard and saved hard deserve a better deal.”
The Work and Pensions Committee is looking into launching an inquiry, chaired by Frank Field, Labour MP for Birkenhead, into pension freedoms ‘rip offs’ amid growing concerns over providers’ charges.
In an article published in The Telegraph, Duncan Smith says he will ‘name and shame’ providers who are stopping savers from accessing their pension pots. He says: “Two months into the reforms, we are watching the market closely. I know the pensions industry is working on the design of new and innovative drawdown products and many providers have stepped up to the plate and are already offering their customers flexibility. But I am concerned when I hear that some firms still appear to be dragging their feet. I have a message for those firms: it is your responsibility to sort this out, and look after your customers. After all, you are holding their money – not your own.”
Financial Conduct Authority Launches Pension Freedoms Audit
In an attempt to head off a future problem, the Financial Conduct Authority has written to the chief executives of all pension providers as part of an investigation into the roll out of the pension freedoms. Firms are being asked to detail the options offered to customers seeking to access their savings; advice requirements for people who want to transfer out of schemes or into retirement products; how insistent clients are being treated; transfer procedures; and exit charges. The regulator will use the data to inform the Treasury’s recently announced consultation into the barriers faced by customers.
Remember This About Pension Freedoms
Pension freedoms changes were implemented to put you in control of your money. So if your pension provider is denying you access to all of the pension freedoms available, switch to a provider that treats you with respect, understanding first and foremost that it’s your money from which they generate their profits!
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