Some over 55’s complain “We can’t access pension cash”
This week’s press have focussed heavily on government reforms to pensions, which came into force from 6 April 2015.
Individuals over the age of 55 now have the freedom to “draw down” as much, or as little, income as they want from their pension funds. Potentially withdrawing their entire fund at once, noting however that up to 75% of the value withdrawn will be subject to income tax at their marginal rate.
However it appears that in practice some pension providers are not yet ready or able to accommodate these rule changes; with some people complaining that many pension providers will not give them their money!
Terry Fletcher, a 65-year-old former salesman from Surrey, told the BBC that he had been unable to cash in two pension pots.
He said that both the companies involved – Zurich and Phoenix – told him it was not possible to take any money out.
“It was all excuses. But you can’t get access to your money. It seems the government came out with these proclamations, but when you try and do it, there are a number of stumbling blocks.”
However, Zurich said that its customers are able to withdraw cash, either in part, or by taking the whole pot.
Phoenix has previously declared that customers can do the same, although there may be a limit on the number of withdrawals.
Nevertheless, it is thought that many smaller pension firms will not offer the chance to take cash out.
A survey by Xafinity – a pension consultancy – has suggested that only 5% of providers were planning to allow “full flexibility”.
Paul Darlow, an actuary with Xafinity, said this was because of the extra costs involved with working out tax liabilities.
“Deducting and paying tax is not straightforward; most systems are not designed to do that,” he said.
However, pension companies are obliged to allow savers to transfer to other schemes, if they cannot facilitate it themselves.
The Association of British Insurers (ABI) – which represents many pension providers – said transferring would be the best option for many.
“Customers can access flexible pension options but may need to transfer first,” said a spokesperson for the ABI.