'Our drawdown policy is cheaper than your drawdown policy' is going to be the claim shouted across the pension playground but it won't matter who's is cheapest, retirees will only be concerned by who is quickest.
Hargreaves Lansdown scrapped the upfront fees on its drawdown policy ahead of the pension freedoms. We're all expecting a mad rush to get at pension pots from April with those aged over 55 finally being able to get their hands on their pension cash.
But if people think it's going to be a case of phoning up their pension scheme and asking nicely for the money, they're mistaken. In order to get the money, you'll have to transfer into a drawdown scheme and unfortunately many workplace scheme – which the majority of retirees save through – do not have the ability to offer drawdown.
This means before transferring into drawdown, you'll have to transfer your savings to a totally different pension scheme. If you want to take advantage of the Hargreaves Lansdown 'free' drawdown (it does have exit fees of £295+VAT for taking all the money as cash in the first 12 months) then your pension will have to be in a Hargreaves Lansdown Vantage Sipp.
Layers of cost
Transferring a pension is not an easy or inexpensive task. You may be penalised by your existing pension provider for moving the money and it is almost certain that you will need a financial adviser to help you transfer. Then you will have to pay set up fees for the new pension or if the pension is on a platform like Hargreaves, you will have to pay a platform fee.
On top of this you'll then have to buy a drawdown policy to actually start taking the money.
The pension freedoms are not a quick fix and there are plenty of layers of red tape to go through before you will be able to access the money so don't expect to be flush with cash come April.
Unfortunately all of this will take time and there will be a lot of people who will be left disappointed by the weeks, and even months, it may take to shift their life savings around, rather than the pension 'bank account' they have been promised.
The only upside is that at least it will give individuals time to think about whether they really want to burn a hole in their pension and hand over large sums of money over to the taxman.
Don't get caught in these pension tax traps next year
Will pension freedom create double trouble for taxpayers
New pension rules: how to avoid a huge tax bill