19th June 2015
Pension minister Ros Altmann is being urged to change the rules to help those with guarantees linked to their pension pots who have been blocked from accessing their savings.
Under the new pension freedoms, those with a guaranteed annuity rate (GAR) built into their pension are required to take advice if the pension fund is above £30,000 and without a sign off from a financial adviser, individuals cannot take the money.
The reluctance of advisers to sign off the transfer for fear of a claim in the future means many savers have been left unable to access their savings. There are also customers who are frustrated at having to pay for advice as they feel the cost is disproportionate to the size of the pot being advised on- in some cases the costs are £1000 or more.
Insurer Royal London has written an open letter to Altmann calling for the government’s Pension Wise service to provide information to customers about their guaranteed annuity rates, which are typically far more generous than annuity rates offered today and would be lost if the consumer took their pension as cash.
In the letter, Royal London wrote: ‘We propose a simple and straightforward solution to the current impasse.
‘Government has created the Pension Wise service to provide readily-available guidance free of change for those approaching retirement…The existing legislation requiring savers with GARs over the £30,000 threshold to seek advice from an FCA authorised adviser should be relaxed as a matte of urgency. There is no reason why the Pension Wise service should not be able to provide necessary guidance on GARs enabling savers to take a considered and informed view of their retirement provision.’
Fiona Tait, pensions specialist at Royal London, said that the government had set out to protection consumers but had actually hindered them.
‘When establishing the rules, government sought to protect customers with guarantees in their pension. But it failed to anticipate the extent of pent-up customer demand to access their own money. This is creating genuine problems for customers, which pension providers cannot address under current rules.’
Tait said it was ‘only right’ that Pension Wise was the first port of call for consumers and it has ‘proven expertise in all aspect of pensions and are genuinely impartial’.
‘It follows that providers should be able to accept customer requests for pensions encashment if they can prove they have been through the Pension Wise process and understand the implications of giving up guarantees,’ she said.