Standard Life is to write to more than 200,000 members of pension schemes it manages, amid fears they could lose the right to tax-free retirement benefits. The insurer says millions of savers in occupational pension plans could lose out unless their scheme providers take action before pension reforms, due to be introduced in April, take effect.
At stake is private pension savers' right to take part of their funds as tax-free cash when they retire, instead of pension income. From April, pension savers will not be allowed to take more than 25 per cent of their funds as a tax-free lump sum. The current maximum is one-and-a- half times savers' pre- retirement salaries, a formula that often produces a much larger lump sum entitlement.
The current rules will continue to apply on pension plans begun before April, so savers will only be caught out by the new rules if they subsequently move existing plans to a new pension arrangement. But Standard said most savers had no idea they could be affected, and urged other pension providers to warn people about the issue.
"This will not only affect people who are high earners - many ordinary scheme members could be at risk of losing out," said John Lawson, the head of pensions policy at Standard.
"For us, this could affect as many as 225,000 people, but across the industry, the numbers are likely to be very much larger - we estimate that £3bn in tax-free lump sum benefits could be lost."
Tom McPhail, the head of pensions at independent financial adviser Hargreaves Lansdown, said savers did not need to take action before April unless they were already keen to move their pensions to alternative providers.
"If you do think you may want to transfer at some stage, there is an argument for moving your money to where you want it before the new regulations come in," he said.
Pension savers routinely use lump-sum cash to finish paying off a mortgage, or for other large spending projects.