Major problems at financial firms have left people hoping to get access to their retirement cash under new rules that came into force in April stymied by companies’ lack of readiness for the changes.
An investigation published in today’s Daily Mail revealed that people are being charged for withdrawals or for switching to rival companies. On top of that they’re being made to wait longer than they should for payouts – up to three months in some cases - while some say they’ve been forced to pay up to £1,000 for financial advice if they say they want their own money.
In the first month of the reforms, pension companies had to deal with an unprecedented 1.13 million phone calls from people wanting to take advantage of the new freedoms. That was an 80 per cent rise in their normal activity leaving many unable to cope with the demand.
On top of that, many have been caught out by the speed at which the new rules were introduced and uncertainties about many aspects of the freedoms leaving them not ready to deal with requests.
Tom McPhail, head of pensions research at Hargreaves Lansdown said: "Given the speed with which the reforms were introduced, it was always likely that some companies would struggle to be ready in time. Investors with these companies should be given the freedom to transfer their money elsewhere without having unnecessary barriers put in their way."
He said it was unacceptable for some firms to charge people or put barriers in the way to stop them making use of the new freedoms. "Insisting that investors pay hefty exit penalties, use a financial adviser that some may not need, or jump through bureaucratic hoops is simply not reasonable or fair," Mr McPhail said.
The new rules allow people aged 55 and over with a defined contribution pension to withdraw their cash if they want, although there are massive tax implications if they take it in one go, which means it’s wise for people to get advice before rushing to access their cash.
A spokeswoman for the FCA said: "We are monitoring how firms are implementing the changes and how that impacts consumers. The majority of people have been able to take advantage of the new rules without any problem, but we are talking to those firms where issues have arisen as the reforms bed in. It is in everyone's interest to ensure that consumers can utilise the new options available to them with confidence."
On Monday David Cameron said he will keep "a careful eye" on companies' treatment of pension savers, after growing complaints that customers are being denied the new freedoms. "The aim of the reforms is to give people more control over their money, not to have a new way of charging people. And we need great transparency in our pensions industry," he said.
Last week pensions giant Friends Life – now part of Aviva – was forced to apologise to 1,300 savers who asked to withdraw a chunk of their cash and inform them it cannot offer them this option.
Instead, savers are being told they can cash in the whole pot - which could leave them with a hefty tax bill - use the fund to buy an annuity or transfer their money to another company.
Friends Life said it was planning to offer partial withdrawals "in due course".