Pension 'bureaucratic hoops' rapped
Pension firms denying savers full access to the new retirement freedoms should make it easy for customers to move elsewhere without them needing to jump through "bureaucratic hoops", experts have said.
The call came after an investigation by the Daily Mail found people were facing high charges for withdrawals or for switching to rival firms, delays in paying out cash and having to pay up to £1,000 for financial advice if they want their money.
The Association of British Insurers (ABI) said firms have been drafting in extra members of staff, who are "working round the clock" to deal with the unprecedented levels of demand seen from customers since the new retirement freedoms came into force on April 6.
During the first month of the reforms, firms handled 1.13 million phone calls from people who were interested in the new freedoms - marking an 80% increase on normal levels.
Tom McPhail, head of pensions research at financial services firm Hargreaves Lansdown, said it was "always likely" that some companies would struggle to be ready in time for the new freedoms, given the speed at which they were introduced.
But firms which cannot offer their customers the full freedoms should make sure they can leave and access the freedoms elsewhere with another company, he said, adding that transfer costs should be "no more than a nominal administration fee" and the process should take just a few days.
He said: "Investors with these companies should be given the freedom to transfer their money elsewhere without having unnecessary barriers put in their way.
"Insisting that investors pay hefty exit penalties, use a financial adviser that some may not need, or jump through bureaucratic hoops is simply not reasonable or fair."
Mr McPhail also said that the Financial Conduct Authority (FCA) should clarify regulations around retirement income withdrawals.
In general, the new freedoms mean that savers aged 55 and over with a defined contribution (DC) pension are no longer required to use their pot to buy a retirement annuity. Annuities give a guaranteed retirement income but they have been controversial in recent years due to disappointing rates.
Instead, firms are offering savers the ability to withdraw their cash in slices if they wish to - like using a bank account.
Savers can also take their pot in one go, although there are tax implications. Generally, the first 25% of the pot is tax free and the remainder is subject to tax.
But it is up to companies themselves to decide whether they want to offer the full range of new freedoms - and the pensions industry had warned before they came into place that some firms would not be able to offer them in full.
A spokeswoman for the FCA said: "We are monitoring how firms are implementing the changes and how that impacts consumers.
"The majority of people have been able to take advantage of the new rules without any problem, but we are talking to those firms where issues have arisen as the reforms bed in. It is in everyone's interest to ensure that consumers can utilise the new options available to them with confidence."
The Daily Mail spoke to savers who were being asked to sign letters saying they had sought financial advice, and paying up to £1,000 for the privilege, while others said they had to wait 90 days to move their money to newer schemes so they could access it.
Writing in the Daily Mail, Pensions Minister Ros Altmann and Harriett Baldwin, Economic Secretary to the Treasury, said that no matter which pension provider someone has saved with, they should be able to use their pension how they want to.
They said: "There is no excuse for firms to claim that their rules mean you can't access your money."
Last week, Ms Altmann said she found it "disappointing" that even the larger pension companies are not allowing their customers to take advantage of the Government's new freedoms.
She said: "It is encouraging that some firms have risen to the challenge. But others seem to be failing to move with the times and are still acting as if nothing has changed."
Speaking earlier this week, Prime Minister David Cameron said he will keep "a careful eye" on companies' treatment of pension savers.
Labour's Lord McFall of Alcluith, a former chairman of the Treasury select committee, has also said there were "rip-offs taking place daily" and called for people to be able to see exactly what they were being charged.
Yvonne Braun, director of long term savings policy at the ABI, said: "Providers have and are continuing to work round the clock to ensure these reforms are implemented as smoothly as possible.
"In the first month alone, the industry handled over one million telephone enquiries - up 80% on normal. While the vast majority of customers have been able to access their funds in full, some may be required to take advice as a result of the Government's rules because they have valuable guarantees.
"Providers are encouraging people to contact the free, impartial Pension Wise service so they can assess their options."