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Will I be able to draw on my pension in April?

New pension reforms allowing the over-55s almost unlimited access to their pension funds is one thing – the pension companies are quite another, says Steve McDowell.

The pension industry cannot claim what the legal profession would call ‘good character’. It has history.
It takes only seconds to search ‘Pensions mis-selling’ to show  torrid tales of the tens of billions paid out in compensation to those who were routinely mis-sold pensions. Pension sign

Then in the last decade there were endowment policies, many of which fell short of projections and failed to pay off the mortgages to which they were attached. (( And now the same companies face an avalanche of compensation claims over annuities – a product sold to hundreds of thousands of pensioners to guarantee an annual income – sold between 2007 and 2013.

If you are over 55 there is great excitement available because from April 6 this year you will be able to access as much of your pension as you want without draconian tax penalties. These penalties have been abolished by the government but not, it seems by the industry. With the average personal pension (defined contribution) worth just under £30,000* many over 55s will naturally want to access these funds to, according to published surveys, pay debts, give to the children, buy a car or go on a dream holiday.

However, while Mr Osborne has promised savers “complete freedom” he failed to compel the providers by law and now only 5 per cent of major pension providers – one in 20 -  has said they will allow them to take their pensions as cash lump sums. Pension consultant Xafinity asked 80 company pension schemes whether they would give their 250,000 members access to the new freedoms in April. It further revealed  that only 2 per cent planned to offer the full range of flexibilities – ie allowing YOU reasonable access to YOUR life savings. Well, bless my soul, the pension industry being unhelpful.

Furthermore the National Association of Pension Funds in November told the Telegraph that savers faced a 12-month wait to use their pension as bank accounts because the companies haven’t got the systems in place to allow it. Hmm, perhaps they could ask a bank?

What can you do about it? The best thing for the moment is to sit tight – don’t be hasty. This might change but you cannot force change, in the meantime do not do anything hasty as if you try to transfer the funds to a provider who is more flexible you will almost certainly face punishing penalties.

The best thing to do, as ever, if to seek the advice of a professional and we at the Family Building Society can help you with that.

* source: Pension consultancy Hymans Robinson (source Sunday Times 20.10.14) states the average pension pot is worth about £28,000.

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