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Pension providers failing to offer new freedoms

Which? Common Money Problems Solved June 2015

Coins falling into pension pot

In this monthly series, we share recent questions about money and the answers provided by our experts on the Which? Money Helpline.

Our experts have taken a number of calls in the last month from people who are unhappy that their pension provider has refused to grant them the full range of pension freedoms, introduced at the start of this tax year. 

Some have been told that they need to have a independent financial adviser to access their pension via income drawdown. 

These members therefore face the choice of paying for an IFA or having to transfer money out of their pot, both of which can be uneconomic if you have a small pension pot. 

Some members have been told they need an IFA in order to transfer out of a final salary pension, but a few are struggling to find an adviser that will recommend this.  

Find out more: Call the Which? Money Helpline – your pension queries answered

Pension provider problems

From April 6 2015, over-55s were granted additional freedoms in the way they could access their pension pots.

It was expected that these freedoms would result in more people taking a lump sum from their pension or accessing their funds via income drawdown, instead of buying an annuity

However, a number of pension providers, including Friends Life, Nest and Phoenix are refusing to offer their customers the option of drawing down their pension.

It is not compulsory for providers to offer the full range of flexibilities, so there is little that can be done to get around this other than transferring funds to a new provider. 

If you are going to transfer away from your current pension provider, check to make sure that there are no exit penalties on your pension contract. Speak to your company as soon as possible as there maybe be considerable paperwork and potential delays involved.

People should be aware of any GARs or other guarantees involved before switching – and this is where financial advice can come in useful.

You should also use the government’s free and impartial Pension Wise service to talk through your options first.

Find out more: Pension Wise explained – what to expect from your Pension Wise session 

Technology failures

Our Which? Money Helpline experts have also taken calls from members who have been limited by their pension provider’s computer systems.

One member, for example, was told that could only take less than £10,000 as the company’s systems were still set up for the old triviality rules. 

We’ve also heard from several members who are struggling to get through to their pension providers. 

Find out more: What the pension changes mean for you – our short video explains the new freedoms

Which? calls for fair treatment of pensioners

Pensions minister Ros Altmann has ruled out making immediate changes that force pension providers to allow customers to access their funds how they wish. 

Nevertheless, Which? is calling on the government to make sure that pensioners are able to take full advantage of the new freedoms to access their pension savings.

Which? executive director, Richard Lloyd, said: ‘It’s clear the government now needs to intervene to get pensioners fair treatment and flexible access to their cash without being stung. We’re asking the new Pensions Minister to prove her consumer credentials and make this her first priority.

‘With providers not stepping up to the plate, a government-backed drawdown provider should be established sooner rather than later.?’

If anyone has experienced similar issues with their pension provider, let us know by sending an email to money-letters@which.co.uk.

Find out more: Better Pensions campaign – sign our petition and help us secure better pensions

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Categories: Money, Pensions & retirement

Please note that the information in this article is for information purposes only and does not constitute advice. Please refer to the particular terms & conditions of a provider before committing to any financial products.

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