Pension savers set to miss tax-free cash, insurer warns

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.

Independent Partners: 10 top tips for retirement. Get your free guide here

News
people
News
i100
Arts and Entertainment
Jeremy Clarkson has rejected criticisms of his language, according to BBC director of television Danny Cohen
tv
Arts and Entertainment
Judi Dench appeared at the Hay Festival to perform excerpts from Shakespearean plays
tvJudi Dench and Hugh Bonneville join Benedict Cumberbatch in BBC Shakespeare adaptations
PROMOTED VIDEO
Life and Style
fashion David Beckham fronts adverts for his underwear collection
Arts and Entertainment
Exhibition at the Centre Pompidou in Metz - 23 May 2012
art
News
i100Most young people can't
Extras
indybest
Sport
Is this how Mario Balotelli will cruise into Liverpool?
football
Arts and Entertainment
Alfred Molina, left, and John Lithgow in a scene from 'Love Is Strange'
film
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    VB Developer (VB, VB.Net, VB Developer, VB.Net Developer

    £30000 - £35000 per annum: Harrington Starr: VB Developer (VB, VB.Net, VB Deve...

    C# Swift Developer (ASP.NET, .NET, MVC, Authorize.NET, Swift)

    £55000 - £65000 per annum: Harrington Starr: A Global Financial Service Organi...

    Web Developer (Web Developer (C#, MVC, HTML5, CSS3, JavaScript)

    £30000 - £40000 per annum: Harrington Starr: A firm focused in building Insura...

    Senior Developer (4.0, C#, Sockets, LINQ, WCF)

    £65000 - £75000 per annum: Harrington Starr: Senior .NET Developer (4.0, C#, W...

    Day In a Page

    Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

    We know all too much about the cruelty of Isis – but all too little about who they are

    Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
    Neanderthals lived alongside humans for centuries, latest study shows

    Final resting place of our Neanderthal neighbours revealed

    Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
    Scottish independence: The new Scots who hold fate of the UK in their hands

    The new Scots who hold fate of the UK in their hands

    Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
    Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

    Blight club: Britain's ugliest buildings

    Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape
    eBay's enduring appeal: Online auction site is still the UK's most popular e-commerce retailer

    eBay's enduring appeal

    The online auction site is still the UK's most popular e-commerce site
    Culture Minister Ed Vaizey: ‘lack of ethnic minority and black faces on TV is weird’

    'Lack of ethnic minority and black faces on TV is weird'

    Culture Minister Ed Vaizey calls for immediate action to address the problem
    Artist Olafur Eliasson's latest large-scale works are inspired by the paintings of JMW Turner

    Magic circles: Artist Olafur Eliasson

    Eliasson's works will go alongside a new exhibition of JMW Turner at Tate Britain. He tells Jay Merrick why the paintings of his hero are ripe for reinvention
    Josephine Dickinson: 'A cochlear implant helped me to discover a new world of sound'

    Josephine Dickinson: 'How I discovered a new world of sound'

    After going deaf as a child, musician and poet Josephine Dickinson made do with a hearing aid for five decades. Then she had a cochlear implant - and everything changed
    Greggs Google fail: Was the bakery's response to its logo mishap a stroke of marketing genius?

    Greggs gives lesson in crisis management

    After a mishap with their logo, high street staple Greggs went viral this week. But, as Simon Usborne discovers, their social media response was anything but half baked
    Matthew McConaughey has been singing the praises of bumbags (shame he doesn't know how to wear one)

    Matthew McConaughey sings the praises of bumbags

    Shame he doesn't know how to wear one. Harriet Walker explains the dos and don'ts of fanny packs
    7 best quadcopters and drones

    Flying fun: 7 best quadcopters and drones

    From state of the art devices with stabilised cameras to mini gadgets that can soar around the home, we take some flying objects for a spin
    Joey Barton: ‘I’ve been guilty of getting a bit irate’

    Joey Barton: ‘I’ve been guilty of getting a bit irate’

    The midfielder returned to the Premier League after two years last weekend. The controversial character had much to discuss after his first game back
    Andy Murray: I quit while I’m ahead too often

    Andy Murray: I quit while I’m ahead too often

    British No 1 knows his consistency as well as his fitness needs working on as he prepares for the US Open after a ‘very, very up and down’ year
    Ferguson: In the heartlands of America, a descent into madness

    A descent into madness in America's heartlands

    David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
    BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

    BBC faces corruption allegation over its Sir Cliff police raid coverage

    Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home