Pension changes 2015: funds unprepared
Pension funds are warning that they haven't been given enough time to gear up for the changes to personal pensions, meaning that many savers won't be able to access their cash next April as promised.
Unsder the new rules, savers will no longer be forced to use their pension pot to buy an annuity, as now. Instead, the over-55s will be able to treat their pension pot rather like a bank account and take out all or part in cash, with 25% tax free.
More than 200,000 savers are expected to take advantage of the change to cash in their entire pension pot next April, with the government set to receive a windfall of up to £1.6 billion in tax as a result.
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However, Graham Vidler, director of external affairs at the National Association of Pension Funds (NAPF), says that his members haven't been given enough warning to design, test and implement the new systems that will be required - from hiring and training new staff to upgrading IT systems to cope.
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"The challenge is that people have been told they will be able to use their pension like a bank account. There isn't enough time for that to happen," he says.
"There are thousands of schemes across the country and some will be able to find a way for people to take some slices out. Other schemes won't be able to do that. They simply won't have time to do it."
In a submission to MPs overseeing the Pension Schemes Bill, the NAPF has produced a list of 101 questions about the pension reforms which it says haven't been properly answered.
These include whether or not pension schemes need to warn savers about how withdrawing a lump sum could affect their tax and benefits, as well as whether they need to monitor whether people have looked for guidance.
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Other unresolved issues, it says, are how to deal with people who are undertain what to do, and how compliance should be monitored.
There's great concern over whether retirees will fully understand the implications of their actions. "Some new products available on the market may carry risks and costs that are not immediately apparent to those retiring and some may only be accessible through a financial adviser, access to which could be costly for some," warns the NAPF
However, the Treasury says that many of these questions have already been answered by command papers, draft regulations and prospective legislation, and describes the NAPF report as "scaremongering".
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