MINISTERS will “carefully consider” insurance industry proposals which promise to allow savers to use new freedoms to access their pension pot without being forced to pay for advice under a new proposed action plan set out by insurers to help people make the most of the flexibilities.
The Association of British Insurers is calling for a joint taskforce urgently to be set up to deal “decisively” with issues arising from the freedoms which have been rolled out by Chancellor George Osborne.
Mr Osborne had announced earlier this week that a Treasury consultation will be launched next month, to make sure that people are not charged excessive early exit fees and are treated fairly when moving their pension to a company that offers them flexible options to access their savings.
If evidence of any excessive early exit fees is found, the option of capping these charges for people aged 55 and over will be looked at.
Mr Osborne previously said there were “clearly concerns” that some companies are not doing enough to make the new freedoms available.
But the ABI has said it rejects any suggestions that the industry is putting unnecessary obstacles in customers’ way.
It has said that the freedoms have been brought in with a “rushed timetable”.
The new freedoms, which came into force in April, allow people aged 55 and over with a defined contribution pension to take their pot how they wish, subject to tax, rather than having to buy a retirement income called an annuity.
But is up to firms whether they want to offer customers the full range of freedoms.
There have been reports of people facing high charges for withdrawals or for switching to rival firms, delays in paying out cash and having to pay high sums for financial advice if they want to access their money.
The customer control mechanism being proposed by the ABI would take the place of a current requirement to pay for regulated advice where customers have pension savings that have guaranteed annuity rates and are valued at £30,000 or more.
A guaranteed annuity rate could give a pension saver a higher level of retirement income than they would get on the open market.
People accessing their pot without paying for advice through the proposed new mechanism would need to have had a specific guidance session about this with the Government’s free Pension Wise or the Pension Advisory Service (TPAS), to make sure they understood the implications, the ABI suggested.
ABI chairman Paul Evans and ABI director general, Huw Evans said: “While the vast majority of customers so far have successfully exercised their choices without complaint, it is clear that implementing the law and regulatory requirements as they currently stand is not enough to ensure the benefits of the reforms can be universally felt.”
A Treasury spokeswoman said: “We welcome the ABI’s commitment to ensure that people who have worked hard and saved all their lives benefit fully from the Government’s pension freedoms and we will carefully consider their proposals.”