The much-vaunted Great Pensions Freedom Day has turned out as a disappointment for millions of retirement savers who have had their dreams of taking cash from their savings dashed.
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Many of the largest pension providers are either not ready or not willing to offer flexible pension drawdown.
Those who could draw down their pension pots have spent the money on home improvements, cars and boats.
Pension companies estimate the over 55s accessing flexible drawdown have taken more than £2 billion in cash since April 6.
Flexible drawdown has also triggered a windfall for the Treasury as more than £500 million of the cash has gone into the government coffers as tax.
Brisk business
Companies taking part in the scheme report brisk business, including Zurich, Scottish Widows, which also runs the Clerical Medical and Halifax pension schemes and Standard Life.
Others, including Aviva-owned Friends Life and many workplace or small funds, are not allowing drawdowns because they say their pensions do not allow the measure or they do not have the technology in place to manage the scheme.
However many pensions advisers are suggesting that clients with pensions in a fund not offering drawdown should transfer their cash to one in the scheme.
Scott Mullen director at My Pension Expert said: “Unwilling or unhelpful providers have a lot to lose if their clients decide to take their money elsewhere. A professional pension advisor will also help with advice on where to put the money and any tax issues.”
Pension rules guarantee the rights of retirement savers to transfer their money out of a scheme on request, but they might have to pay a charge to do so.
Small pot pensions
The first step is calling a pension firm and asking for a pension transfer value to benchmark how much money is in the fund and how much of that can be transferred across to another provider.
Scottish Widows revealed seven out of 10 calls to their pension helpline were about flexible drawdown and 85% of the calls were from retirement savers with pots of less than £30,000.
Providers Zurich and Aegon said most calls were from customers with pensions of less than £10,000.
“The average pension being cashed in is worth £12,000,” said a Zurich spokesman. “With most of the activity relating to small pensions, the general view is people probably do not think missing £10,000 or £12,000 over 20 or 30 years in retirement is really not going to make a lot of difference to their lifestyles.”
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