Prudent savers resist ‘mad rush’ to claim pension cash

PENSION SAVERS are resisting the urge to make a “mad rush” for their cash after new flexibilities have come into force, according to financial firms.

Companies taking calls from people keen to make the most of the new retirement freedoms, which started on Monday, said in general savers appear to be behaving “reasonably” and are taking time to consider their options.

Richard Parkin, head of retirement for Fidelity Worldwide Investment, said call volumes were fairly low over the Easter weekend, although last week had seen a significant increase.

He said: “The bank holiday was just the start of the new rules and it is pleasing in some ways that we did not have a mad rush as it may mean people are properly researching their options before making these important decisions.

“Generally behaviour seems reasonable, with those wanting to cash out completely generally having smaller value pots and those with larger savings just looking to take tax-free cash.

“We have got a number of sizeable accounts looking to cash out completely but they seem to be the exception at this stage.”

The new rules mean the 320,000 people who retire each year with a defined contribution (DC) pension are no longer required to use their pension pot to buy a retirement annuity, giving a guaranteed regular retirement income.

Instead they can take their pot in one go or use it like a bank account and withdraw cash in slices.

People aged 55 and over will only pay their marginal rate of income tax on money they withdraw from their pension and the first 25% of the pot is generally tax free.

But concerns have been raised that some people may fall prey to scams, run out of money too early, or not realise the tax implications of withdrawing money from their pots.

Prudential said it had taken around double the number of calls it would normally take after a bank holiday weekend.

It said many have been from people looking to access their funds and take out cash lump sums, as would be expected when the reforms had just come into force.

Scottish Widows is anticipating two years’worth of queries in the next couple of months. It has taken on additional staff to help deal with the 350,000 extra calls it is expecting.

Those it has received so far have mainly been general inquiries about how the reforms work and from people looking to fully or partially cash in smaller pots.

“People are properly researching their options.” Richard Parkin