PENSIONS: WHAT A SHAMBLES!

Revolution in crisis ++ Savers barred from taking out cash ++ £1,000 bill just for advice ++ ‘Could be worse than PPI’

GEORGE Osborne’s pensions revolution was in crisis last night with thousands of savers unable to spend their nest eggs as they want. Just 66 days into the new regime, financial giants are under siege from furious customers.

The Chancellor had promised savers easy access to their cash. But today a Money Mail investigation can reveal a string of disastrous failings, including:

Firms refusing withdrawals for fear of being sued for negligence in years to come;

Savers being forced to pay up to £1,000 for financial advice if they want their money;

Customers turned away because they have only small pensions; n Delays of up to 90 days in paying out cash; n Sky-high charges for withdrawals or for switching to rival firms;

Insurers knocking thousands off the value of pensions customers want to access.

Lord McFall, a former chairman of the Treasury committee, told peers yesterday that ‘rip-offs were taking place daily’.

He accused the pensions industry of needless complexity and inertia and urged ministers to force firms to reveal their charges.

Lord Hughes of Woodside warned the chaotic reforms would make the ‘PPI scandal look like a children’s tea party’.

The Treasury and the Department for Work and Pensions admitted last night that they were monitoring the situation closely.

Writing for the Daily Mail today, pensions minister Ros Altmann said: ‘No matter which pension provider you saved with, you should

be able to use your pension how you want to.’ And Harriet Baldwin, economic secretary to the Treasury said: ‘We have legislated to allow pension schemes to override their previous narrow rules, so they can offer the flexibilities if they want to. This means that there is no excuse for firms to claim that their rules mean you can’t access your money.’

The Chancellor’s pension reforms – unveiled in the budget in 2014 – were supposed to give the power to pensioners to spend their life savings as and when they wanted.

He said: ‘Pensioners will have complete freedom to draw down as much or as little of their pension pot as they want, any time they want.’

Since April 5 this year anyone over 55 should in practice be allowed to take all their savings out in cash, or dip in and out of it as they want – just like a bank account.

But in reality savers are finding that they cannot get their hands on their money.

Some firms such as Nest, Friends Life and Phoenix will not allow savers to use their pension like a bank account.

Others charge hefty fees of up to £240 for each withdrawal, or place restrictions on how much someone can take out.

Money Mail has been bombarded with letters from pensioners who have been told they cannot have their savings unless they first see a financial adviser. This typically costs about £1,000. And even if they do consult an adviser they may still may not be able to get at their cash if the adviser does not think taking the pension is a good idea and refuses to help.

Some savers had found that the specific type of pension they have does not qualify. And many have faced lengthy delays because insurers have been forced to dig out pension contracts that are three decades old.

Customers of firms such as Clerical Medical, Phoenix Life and Aegon who have experienced huge delays in getting hold of their cash.

Malcolm McLean, senior consultant at actuaries Barnett Waddingham, said: ‘There are huge inconsistencies between how each insurer interprets the rules and people are left not knowing what to do. Savers who want to move their pensions could end up being forced to pay big penalties.

‘You have to wonder whether the Government should have made the freedoms compulsory. The main problem is that this whole exercise was carried out in a rush.’

Justin Modray, founder of website Candid Money, said: ‘We seem to have reached a tipping point with what’s going on. It could be years before the option for customers to use their pensions like a bank account is widely available.’

Dr Yvonne Braun, of the Association of British Insurers, said: ‘Providers have and are continuing to work round the clock to ensure these reforms are implemented as smoothly as possible.

‘In the first month alone, the industry handled over one million telephone enquiries – up 80 per cent on normal. ‘ While the vast majority of customers have been able to access their funds in full, some may be required to take advice as a result of the Government’s rules because they have valuable guarantees.’

Geoffrey and Judith Adam from Berrynarbor, Devon, suffered long delays as they tried to get their pensions from insurers Friends Life and Clerical Medical. The couple told the firms in January that they planned to cash their pots when the reforms began.

In April, Mr Adam contacted Friends Life to ask for the his entire £30,000 pension fund to be paid in cash. At the same time he asked Clerical Medical for £7,377 - this was equivalent to the 25 per cent tax-free lump sum he was entitled to.

He planned to keep the remaining 75 per cent invested. But he was then left waiting for weeks.

Mr Adam, 65, a shipping magazine editor, had to send seven letters to Friends Life, writing to everyone from rank and file staff to the chief executive. He wrote three times to Clerical Medical asking for his £7,377.

Friends Life responded by offering Mr Adam an annuity — the complete opposite of what he wanted.

Clerical Medical, part of the Lloyds Group, eventually paid up, apologised for the delay and gave the couple £232 compensation for the wait.

‘Reached a tipping point’

WHEN George Osborne promised savers freedom to spend their nest-eggs as they chose, nobody supported the principle more warmly than the Mail.

For far too long pensioners had been at the mercy of insurers offering miserly annuities in return for life savings.

But as we repeatedly warned, we had two grave reservations.

One: the Chancellor was introducing his scheme with far too little preparation, catching pension providers on the hop and appointing too few advisers to guide savers through the minefield.

Two: without proper protections, his reforms would offer a field day to fraudsters and the unscrupulous.

Just 61 days on, it gives the Mail no pleasure to report that everything we warned has come to pass. Today a Money Mail investigation exposes: savers charged sky-high fees for dipping into their pension pots… some forced to pay £1,000 for advice, because the free guidance is inadequate… endless delays and confusion, with some firms refusing to hand over customers’ savings for fear of being accused of misselling…

Writing in today’s Mail, Pensions Minister Ros Altmann and her colleague Harriett Baldwin insist there is no excuse for providers to mistreat savers.

Yet that’s exactly what they’re doing. So if ministers want to rescue these reforms, they must act now.