This week marks the first few days of the pensions revolution that has, in theory, allowed people aged 55 and older to do what they like with their retirement savings. The big pension firms have reported high demand from customers following the launch of pension freedoms on Monday. Standard Life, for instance, said: "We have received an unprecedented level of customer contact."
The good news is that not everyone is queuing up to blow their cash on fast cars or holidays, although there have been plenty of people looking to use their pensions savings for other purposes. "The main focus this week for those with very small pension pots is to understand their options to release cash," said Jamie Jenkins, of Standard Life. "It has been interesting to see the wide variety of reasons people have given – everything from paying off debt to purchasing a speedboat."
Meanwhile, Tom McPhail, head of pensions research at Hargreaves Lansdown, said: "We've seen some slightly unexpected activity; for example existing drawdown investors choosing to cut their income withdrawals now, in order to be able to take larger lump sums later."
Calls to firms are proving to be lengthy as confused people explore all their options. But not all will get a pleasing response, as one Independent reader discovered. Ian Wood, of Musselburgh, East Lothian, was looking forward to pension freedom day as he has just sold the business he ran for 16 years. During that time he built up a private pension with Aviva, but he also has a pension with a bank that he built up while working for it for 26 years.
"I will have no income this tax year so my plan was to take the tax-free element of my Aviva pension pot along with a third of the remaining capital in each of the next three tax years. In year four I would draw on my RBS pension, which will have grown."
What could be more sensible? He's considered the tax position and the importance of ensuring he has an income in later life and is using the new rules to his advantage. But not, sadly, yet. "I phoned Aviva to tell them of my plans but they are not interested and simply told me that it has 'no plans yet to allow this'."
Mr Wood, 61, was told to watch the company's website for further information. He was cynical about Aviva's response, saying: "It dawned on me that my plan meant there was nothing in it for them."
I believe he is being overly cynical, although he also pointed out that he has until the end of the current tax year to sort things out, so is reasonably relaxed at the moment about the situation. But it serves as a warning to others that getting at your cash may not be as easy as you hope. A spokesman for Aviva said: "We are working with customers on a case-by-case basis as there are many options to consider."
Elsewhere Tommy Young, the chief operating officer at Aegon, said: "We've received a number of enquiries from customers thinking they will be able to access their retirement savings immediately, just like they do their bank account, and expect to be able to withdraw money as and when they like without having to complete any forms."
Of course that's not possible and pension companies have the problem of managing people's expectations as well as serving them. But rather than getting frustrated with what seems like a slow response, take the extra time to ensure your plans for your pension pot are right for your long-term finances.
The pension firms have had the new rules thrust upon them with unprecedented speed, mainly, it seems, because of political expediency. They have a duty to ensure that rushing to meet customers' requests doesn't disadvantage them. That means ensuring people are aware of the tax situation as well as the risks of spending all their retirement savings and leaving themselves nothing to see them through their old age.
Jamie Jenkins said: "The length of conversations with customers this week is much longer than normal, but we think it is crucial to take the time to ensure that people are making fully informed decisions." He's absolutely right.
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