Pensions giant in U-turn over letting savers take their cash

ONE of Britain’s biggest pension providers has become the first to perform a U-turn after firms were criticised for blocking savers from accessing the new freedoms.

Insurance firm LV= has announced it will lift restrictions which had prevented customers with small pots from using their pensions like a bank account.

It comes just one day after the Mail launched its Play Fair On Pensions campaign, which is calling for insurers to allow customers access to the full freedoms promised by the Government. Since April, over-55s have been allowed to cash in their pension, rather than being forced to buy an annuity, under the most radical pension reforms in a century. Chancellor George Osborne promised said people would be able to use their pensions like a bank account and withdraw their retirement savings as and when they wished.

But the Mail discovered many people had been locked out of the new freedoms or were being charged huge fees if they did try to withdraw their cash or transfer it to a rival firm.

LV=, which has nearly six million customers, previously said only savers with £30,000 in their pension pot could use their flexible drawdown products, which allow people to withdraw their money in chunks while keeping the rest invested.

But it has now opened up its policy to include savers with any size of pot – raising hopes that others will follow suit. The company said the changes would allow tens of thousands more customers the freedom to withdraw their pension gradually and flexibly, rather than all at once.

John Perks, of LV= Retirement Solutions, said: ‘We originally had minimum pot restrictions on our flexi-access drawdown solution reflecting how we thought customers with small pots would act.

‘However, we have removed these to ensure all of our customers are able to take advantage of the pension freedoms.’ LV= said customers wishing to do this must pay a £295 set-up fee for funds below £50,000 and then pay an management fee of 0.25 per cent. They will not be charged for each withdrawal.

Labour’s pension spokesman Lord Bradley said: ‘Clearly, it is a very welcome move to allow more people to draw down their money in a flexible manner.

‘However, we are also worried customers with some companies are being charged excessively high fees to withdraw their pension.’ Former pensions minister Steve Webb also welcomed the move by LV= but said not all insurers would be able to follow suit and offer flexible drawdown to all customers.

‘Providers need to either give people access to the freedoms or make it as easy as possible for them to move elsewhere,’ he said.

The Mail has told how some firms were holding on to savers’ money by insisting withdrawals were approved by an independent financial adviser. This can cost up to £2,000. Others were found to be charging up to £240 each time someone wanted to take a chunk of money, while others were asking hundreds of pounds in exit fees if a saver tried to move to a different firm.