Pension funds not ready for Osborne’s ‘bank account’ revolution

PENSION savers are at risk of being unable to use their retirement pots like bank accounts next year because firms have not been given enough time to gear up for the changes, pension funds are warning.

Chancellor George Osborne

With just five months to go before the Government’s retirement savings revolution is due to come into force, a list of 101 “uncertainties” over exactly how the reforms are intended to work has been drawn up by the National Association of Pension Funds (NAPF).

In a move trumpeted by Chancellor George Osborne, from next April, people aged over 55 have been promised new flexibilities which will allow them to take the pension pots they have built up how they want, rather than being forced to buy a lifetime income known as an annuity.

Sign up to our Business newsletter

Sign up to our Business newsletter

Instead of being charged a “punitive” 55 per cent tax if they withdraw the whole pot, as would be the case for many people now, the over-55s will be able to take their money subject to their normal marginal tax rate. They have also been promised the ability to draw money out of their pot in slices if they wish to, with 25 per cent of each slice being tax-free.

But Graham Vidler, director of external affairs at the NAPF, said that while people will be able to get their hands on their money next year, “the challenge is that people have been told they will be able to use their pension like a bank account.

“There isn’t enough time for that to happen”.

“There are thousands of schemes across the country and some will be able to find a way for people to take some slices out. Other schemes won’t be able to do that. They simply won’t have time to do it.”

The NAPF listed 101 questions which it said still needed fully answering, including how schemes should notify members of the tax and benefit implications of taking their pension as a lump sum and if schemes will have to track whether or not people have sought guidance.

A Treasury spokeswoman said: “These concerns are ill-founded and border on scaremongering.

“Many of the questions raised by the NAPF have already been answered by command papers, draft regulations and legislation that is being considered by Parliament.

“The NAPF themselves have recognised this.

“These reforms are supported by the vast majority of pension providers and consumer groups.”