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Harriett Baldwin MP: share your experiences of transferring pensions

Transferring money

The Government’s consultation into pension transfers and early exit charges closes soon. Here’s the Economic Secretary to the Treasury, Harriett Baldwin, asking for your views.

In the seven months since the pension freedoms have come into effect, over 200,000 people have taken advantage of their new rights to access their retirement savings how and when they want to. More than 90% of people are now being offered some degree of flexibility within their existing scheme and a quarter of the largest firms are planning to launch new products in the next six months. It is clear that the pensions landscape is shifting, and that it is shifting in favour of consumers.

But the Government knows that the job is not finished. While our reforms have allowed many of you to exercise these new rights, we know that too many people are still facing unnecessary barriers to access their money. It is only right that providers allow eligible members who wish to transfer to do so easily, within a reasonable time-frame and at a reasonable cost. Where providers are standing in the way of allowing consumers to switch, they are acting against the spirit of the reforms.

We need your views

We’ve been consulting over the summer on options to address these barriers, including how you can better understand whether you need to seek financial advice in order to transfer your pension.

It is vital that we reach any decision on the basis of the evidence we receive, and the pension regulators have already gathered data from providers on these issues. However, I know that all too often, amidst the formality of government consultation processes, the voice of individual consumers can be drowned out.

That’s why we’re running a consumer survey alongside this consultation, to give you the opportunity to tell us about your views and experiences directly.

Early exit pension fees

With the consumer survey closing on Monday (26 October), I would encourage any of you who have been affected by these issues to take our survey. It shouldn’t take longer than fifteen minutes and will ensure that your voice is heard.

Some of these questions include:

  • Have you tried to access your pension savings before your selected retirement date? How was the process for you? Were you encouraged to seek independent financial advice before doing so?
  • What do you think could be done to make the process for transferring pensions from one scheme to another quicker and smoother?
  • Were you charged an early exit fee? Were these charges explained clearly? What would constitute an ‘excessive’ or unfair early exit charge to you?

This is a guest contribution by Harriett Baldwin, Economic Secretary to the Treasury. All opinions are Harriett’s own, not necessarily those of Which?

Comments
Member

I just thought perhaps people may have missed out that the UK government policy micmics a 20 year old Australian experiment which apparently has sufficient problems that they are thinking annuities are a good idea.!

I only dealt with peoples finances for a couple of decades and therefore have not the experience of politicians and consultants. I think the lesson from Australia is that people should only be able to access the sum leftover after a suitable minimum sized annuity has been purchased,
” An independent report commissioned by the Australian government suggests that pension holders Down Under should be forced to use some or all of their pension pots to buy a guaranteed income in retirement, such as an annuity.
It is in complete contrast to the reforms being enacted in the UK from next year that moves away from compulsory annuitisation and will give 13million people with defined contribution pensions the freedom to spend their pension how they want.”
Thisisthemoney 1st August 2014

“The government may be keen to follow the Australian pension model, but what it has failed to recognise is that the antipodean system has run upon rough ground. In a 2012 report, chief executive of Australian accountants CPA Alex Malley, set out why pension freedom had not only been bad for the government but also for pensioners, and the government is now looking to once again restrict access to pensions. ”
Citywire Money 5th Sept 2014

Member
Martin French says:
22 October 2015

All though there are some companies who may delay payment of the pensions, companies are having to deal with people who have no idea what they are doing and do not read the government pension guidelines or requirements by pension companies before they can release the payment. I would say as many as 80% of people claiming their pension early believe that once they have completed the form (correctly or not), believe that the money will be in their bank accounts within 48hrs. Although the new legislation is a good idea, it was brought at the last minute by the government and gave pension companies no time to prepare for massive number of requests by pension holders.

Member

Martin, I agree that it will take a little time to release funds. However from what I have read some companies are simply refusing to release funds in line with the government’s requirements, or are charging excessive fees to do so. Is that the case?
Protecting people from themselves is always a difficulty, but many will have the sense to understand their needs and the consequences of taking pension money, particularly instead of buying an annuity. They know their situation best.

Certainly advice should be sought but this should be available relatively inexpensively for someone in a “standard” position who just wants clarification on what is on offer – like the tax situation – and to be helped understand their likely retirement finances and what provision should be considered; but on a “no liability” basis. For others who do not understand then a full review of their finances from an IFA might be appropriate. This need not be horrendously expensive either in my experience if they gather together their information and if it is not complex.

Member

Why is this convo published with one day to go before the survey closes?
The government, I thought, announced changes in the way pensions could be accessed. Why, therefore, are pension companies allowed to decide whether they do what the government says…..or not? It seems to me to have been a good idea badly executed.

For some people annuities will be good – likely long retirement, certainty of income. For others they may be poor value, inappropriate if they have other income sources and anyway we grown ups should have the responsibility to decide what to do with our savings.

On balance I think pension savings should be made out of taxed income – no tax relief – but the resulting pensions up to a limit should not be taxed. Alternatively tax the pension, but limit the relief on contributions to 20%. Why, when benefits are not taxed, should we be taxed on the state pension that has generally been paid for out of our tax?

Member

Hi Malcolm, you’re right. The consumer survey has now been extended until Monday which will give people more time.

Member

Thanks Patrick. I am so glad that Harriett read my post and acted accordingly. I am sure you helped as well. 🙂

Member

You have to laugh at the ineptness in operation. An entirely foreseeable part of the process is being “addressed” after the event. I have recently finished the book “The Blunders of our Government” [2014] and this just fits in with the tenor of the book. HMRC rushing through acts and then sorting out the flaws – possibly.

” 15. Was the exit charge calculated on the basis of a percentage or a fixed amount of the value of your pension pot?
Percentage
Fixed amount
Other (please specify)
Don’t know”

which leads to:

“The government is considering options to address the issue of early exit charges.
· a legislative cap on all exit fees
· a flexible legislative cap which would apply only in certain circumstances
· a voluntary, industry-led approach to restricting fees and charges”

However just to be fair you can also answer other Authorities on this also ….
“1.12
Alongside this consultation the FCA and TPR are carrying out a comprehensive evidence
gathering exercise, including on the existing processes for pension transfers and any fees and
charges that members might incur for leaving their scheme early. The government has included
a number of questions in this consultation which overlap with those asked by the regulators in
the course of their evidence gathering exercise. This is because the government is keen to
understand views on these questions from a wider group of stakeholders, including consumer
representatives. Providers and schemes may wish to repeat the answer they have provided to the
regulators, or refer to their answer to the regulators.”

Member

Went into mental health care, did not receive appropriate support and lost pension during the bank melt down saga a few years ago. Care support advisors know about welfare benefits but totally clueless about pensions.

Member

I wouldn’t be in favour of changing that Ernestine. Giving pension advice is a very specialised service that really is best left to experts in that field. Your care support advisors could have pointed you in the right direction though.

Member
Ken. says:
22 October 2015

I have yet to take my pension, and would hope to delay doing so for several years, but I have consulted an IFA to hopefully put me in a reasonable position when the time comes
I believe giving individuals access to their pension is an admirable goal.
If we wish further generations to invest in their pensions then charges should be fair and reasonable, without excessive sums being levied by providers.
With such low annuity rates presently available, alternatives such as income draw down should be explained and on offer. Likewise the best practice illustration for the individual to avoid incurring excessive amounts of monies in Taxation should be clear. It might also be prudent to ensure a “life expectancy” calculator is displayed prominently within the literature to prompt people to consider this factor.

Member

I’m in your situation Ken and totally believe that these changes are exactly what is needed. Yes the government is not good at getting these sort of things right but no one should forget that we are only in this position because of the insurance companies absolutely “ripping the a**e” out of a good thing and conning money from customers in fees or extremely poor annuities. It’s a bloody mess but all of this is down to the insurance /pension providers. At least when I am offered a pittance of an annuity I can now tell these companies to stick it. Oh, and by the way I will likely have one annuity and one drawdown so am not grabbing the cash and run. In my opinion the pension annuities and fees scandals are every bit as bad as some of the worst banking scandals we have seen.

Member
Catherine Donaghy says:
20 March 2016

My father paid into a pension fund for 9.5 years. The company closed down and my father took a job with local government. When he retired some 25+ years later he was unable to get the pension funds he paid into for almost 10 years. He went to CAB for help but due to ill health he was unable to attend there offices every week and wait between 3 to 4 hours for help. I think it’s disgusting that pension fund managers are scamming our hard working pensioners.