Thousands of pensioners will be locked out of the new pension rules, and denied the increased freedoms promised by George Osborne, because 19 out of 20 pension companies won't allow their customers to take advantage. The major spanner in the works is that while the government allows people the freedom to withdraw whatever they like - whenever they want to - there's no rule that says pension companies have to allow it.
And research by Xafinity pension consultants, says that the vast majority of pension firms are taking advantage of this, and refusing to let people get their hands on their cash. A measly 5% will let people take their cash as lump sums in April, and only 2% will allow full flexibility - making unplanned withdrawals and letting children or grandchildren inherit what is left over - tax-free.
It means that while technically you should be able to choose between buying an annuity with all or part of the fund, drawing regular lump sums, or taking the lot (subject to tax), the firms are likely to offer only an annuity or traditional drawdown.
The researchers concluded that this wasn't a formal position taken by all the firms - it's just that they haven't managed to get their systems ready for the changes - which came as something of a surprise when they were announced. Spokesman Paul Darlow said that full flexibility remains an 'aspiration' for many companies. However, he added: "This leaves millions of people near to retirement with considerable uncertainty."
Those in company pensions face just as much uncertainty. The researchers approached 80 schemes and asked whether they would offer the new freedoms by this April: 58% haven't decided, and 15% have ruled it out. The National Association of Pension Funds has said in the past that it could take another 12 months after this April for pensions to get to the stage where they are ready to offer flexibility. This is partly because company pension fund trustees only meet a few times a year, so changing anything takes an inordinate length of time.
Commentators have been scathing about the timing of the changes. Normally with something as complex as pensions, there would be another year for the changes to be implemented before they were rolled out - so that every firm had the time to prepare. However, there have been suggestions that the political impetus was to get thousands of pounds in voters' pockets shortly before the general election.
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What can you do?
If your pension company is not offering the new freedoms, and you have the flexibility to delay taking your pension, you might prefer to do that in order to wait for the full flexibility to be available. Pensions minister Steve Webb was talking up this option earlier this month in the hope of staving off chaos. He said: "There is nothing magical about 6 April. I think there is a case for waiting and seeing if you can. You don't have to rush this. Wait and see what products become available," he said. "If you are in a position not to make a decision on 6 April, I suggest you don't."
If you need the money immediately (and your company isn't offering flexibility), you will have to choose between the two undesirable options of putting up with what your pension company currently offers, or switching to a provider that allows the flexibility you need - which could cost you a fortune in costs and charges, and can take months.
Either way, you should approach to your company pension trustees, or the pension firm you are saving with, and find out what they intend to offer by April. It's also worth bearing in mind that April is going to be a busy and possibly chaotic time for the pension companies - so it's worth getting in touch sooner rather than later to find out where you stand.
Calculate your pension income options
At that point, you should track down the pensions guidance that the government has promised will be available for people who are retiring and making pensions decisions, and if you don't think this goes far enough, you really should consider getting some advice. Nobody likes paying for financial advice, but when you are making decisions that will affect the rest of your life, it may be an investment that pays over the long term.
But what do you think? Will you want to take advantage of the new flexibility? And what will you do if you can't?
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