This week’s Budget revealed the latest of the big changes we’ve seen to the pension system in recent years – and we can expect more to come. But how have the reforms affected you?
We’re keen to make sure that recently introduced pension freedoms really work for you – and that your retirement pot is properly protected – no matter how and when you choose to take your money.
Last week we called for regulators to increase the protection of income drawdown products. More people are increasingly opting to use these to access their savings, as a result of the recent reforms.
But these are usually only covered up to a maximum of £50,000 by the Financial Services Compensation Scheme (FSCS). In contrast, the FSCS scheme covers 100% of the value of an annuity if an insurer fails.
Which? executive director, Richard Lloyd, said:
‘Pensioners now have more freedom over how to access their savings, but the level of protection varies considerably depending on the product they choose.
‘People save hard for retirement all their lives and need to know their money is safe if their provider goes bust. The regulators must keep up with the reforms and increase the FSCS coverage for drawdown products as they have with annuities.’
What pension changes are in the Budget?
In the Budget, the Chancellor confirmed that the Government will be consulting on making it easier to transfer pensions from one scheme to another, possibly including a cap on excessive early exit fees.
This is a good first step, but we want it to also look at the other fees being levied on customers who want to access their pensions flexibly.
In the coming months, we can also expect to see and hear more about Pension Wise – the Government’s pensions guidance service currently available to anyone over 55 with a Defined Contribution pension. It will now be available to those aged 50 or over.
Also in Wednesday’s Budget, the Government said it will consult on proposals for a radical change to the pension saving system. It is also slowing down its plans for a secondary annuities market, which now won’t be implemented until 2017 at the earliest.
Have you taken your pension since April – how have the reforms affected you? Are you enjoying the new flexibilities? Have you spoken to your provider about your options? Have you used Pension Wise – what was your experience?