The government is considering action to strengthen people’s rights to access their pensions flexibly.
Barriers to pension freedom
George Osborne, the Chancellor of the Exchequer, has announced he intends to remove barriers to people taking advantage of the recent pension freedoms. There have been concerns that companies have not been doing enough to allow people quick and penalty-free access to their money.
The Treasury is set to announce a consultation next month to ensure that people are not charged excessive early exit fees or held up by their provider when trying to move to a company that offers more flexible options.
The new pension freedoms, which came into effect on 6 April, allow people who have saved all their lives and built up defined contribution pensions to access their savings how and when they want.
Find out more: Pension provider problems – some of the issues faced by Which? members
Consultation to ensure flexibility
The pension changes should mean that people are able to transfer their pension easily, within a reasonable timeframe and at reasonable cost, so that they can take full advantage of the new flexibilities.
However, there have been numerous examples of people being charged to exit their current provider or not being able to arrange a switch when they want to.
The consultation by the Treasury will particularly focus on:
- Options to address any excessive early exit penalties. These include, if there is evidence of such penalties, the option of imposing a legislative cap on these charges for those aged 55 or over
- Making the process for transferring pensions from one scheme to another quicker and smoother, to help people make use of the new freedoms.
Find out more: Pension transfers explained – the pros and cons of transferring your pension
Which? wants further action
Which? executive director, Richard Lloyd, said: ‘The government must act to allow people to switch pension providers without being stung by excessive fees if they will not offer the new freedoms.
‘The government must also work with the regulator to ensure products offer value for money, and consider what further reforms are needed to make the market truly work for consumers, including a charge cap on default drawdown products.’
Our Better Pensions campaign is calling on the government, pension providers and regulators to protect people when they take money out of their pension by:
- Establishing a government-backed provider to ensure everyone can access a good value, low cost product
- Introducing a charge cap for default drawdown products
- Safeguarding savings in schemes that go bust
Find out more: Better Pensions campaign – sign our petition for better pensions