Insurers shouldn’t have any excuses
EARLIER this year, George Osborne introduced the most significant reforms to the pensions system in a century.
Gone is the effective requirement to buy an annuity. If you’re over the age of 55, you now have the freedom to access your defined contribution pension pot in the way you want — in flexible payments, by taking some out and leaving the rest for later, as a regular income, or as cash.
As the Prime Minister said this week, we want to give people more control over the money they saved hard for over their working lives. It’s great that many pension providers and schemes have risen to the challenge and are offering their customers flexibility.
However, it is disappointing that some firms are lagging behind, and some providers have chosen to focus their efforts on far too narrow a range of options.
No matter which pension provider you saved with, you should be able to use your pension how you want to.
The industry should be embracing this exciting opportunity and developing innovative and competitive products that work for you — and we will work closely with them to help them achieve this. We have to recognise that some companies have met practical difficulties along the way, including creaking IT systems that can’t ‘speak’ to each other.
That is why we’ve allowed insurance companies flexibility over how and when they introduce these reforms. But we are determined that customers should in no way be disadvantaged by that.
So, we have made sure that if you can’t access your pension flexibly, or feel you are being charged too much, you can transfer your savings to another provider.
We are monitoring these issues closely and will continue to ensure that there is a system in place that works for you. We have also legislated to allow pension schemes to override their previous narrow scheme 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. There are some circumstances where you will be asked to seek independent financial advice from a regulated professional adviser — that’s simply because your pension has special, valuable features which you need to understand before you make a decision. Ask your pension provider to explain why they’re asking you to take financial advice.
The Government will be watching this issue closely and working with the industry and regulators to address any problems.
If you’re considering accessing your pension, make sure you take the time to find out what the options are, get help and support, and make the decision that is right for you and your family.
AFTER all, this could well be a once- in- a- lifetime decision that will affect what you have to live on for the rest of your life. To help you make that decision, the Government has set up Pension Wise, which offers free, impartial guidance on your options and will help you to understand the tax that you might pay, what charges to look out for and other important information. These have been major changes, underpinned by a very simple philosophy: it’s your money, you have earned it, you have saved it and we want you — not the Government or pensions companies — to choose what you do with it.
Our focus now will be to make sure that the new system works in practice — and that the industry helps you get the most out of these historic reforms.