In the first month since their introduction on 6 April, ABI members have dealt with just over one million phone enquiries from customers, an 80% increase on what they would normally expect. The ABI also sets the record straight on some of the common questions as the reforms bed in.
Dr Yvonne Braun, Director, Long Term Savings Policy, ABI, said:
“Insurers are committed to making the pension reforms a success and are rising to the challenge, working around the clock to deal with the huge demand from customers. The vast majority of customers have been able to access their pot. As we have said before, the biggest overhaul of pensions in a generation introduced in just a year was always going to be a challenge, and where issues occur the industry is committed to working closely with the Government and the FCA to resolve them.
“It is important to remember that there is no one size fits all option, especially for those customers who may have valuable pension guarantees or who could be facing tax liabilities, which is why the industry is encouraging people to contact the free, impartial Pension Wise service for help in assessing their options.”
The ABI has set also set the record straight on common questions raised:
1. Why are not all providers offering all of the options available?
All insurers offer full access to your pension fund, and the majority offer partial withdrawals and such as drawdown. In any market you would not expect all providers to offer all options. Most insurers offer different options, such as income drawdown and lump sums; this can depend on the pension scheme and the customer’s circumstances, and customers can transfer out to access flexible products. This is why providers are encouraging customers to contact the free, impartial Pension Wise service for help in assessing their options.
2. Why are some insurers not allowing access to a pension like a bank account?
A pension fund is not a bank account. You cannot incur a tax liability for taking money out of an ATM, whereas you can from a pension fund. The majority of insurers offer partial withdrawals, but this is not the same as a bank account which has many other facilities and operates in a completely different way. .A pension is a long term investment to fund your retirement, not as a cashpoint for unlimited withdrawals, or to set up direct debits.
3. Why do some providers charge for exercising an option and others not?
Most customers will not face any charges, and where any apply they will reflect the type of pension scheme and the customer’s circumstances Customers are recommended to contact Pension Wise for help in considering their options.
4. Will I face an exit fee if I withdraw my pension early?
Nearly nine out of ten customers eligible for the pension freedoms will not face an exit fee. Some older schemes may charge an early exit fee where customers leave before the term of the policy. These early exit fees reflect the expenses involved in setting up the policy, which would normally have been paid off had savers stayed in the scheme as intended to their retirement date.
5. Why may I be required to get independent financial advice before I can access my pension?
Where your pension policy offers a guaranteed annuity rate then the law requires that you seek financial advice before making any decision. Any options that leave your money invested, like income drawdown or partial withdrawals, require you to make investment decisions so it will be prudent to seek financial advice first. Depending on your circumstances and the risks involved, some providers may say that you must take advice before choosing one of these options from them.
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