The Association of British Insurers and pensions minister Ros Altmann have clashed over customers’ access to the pension freedoms.
Last week, Friends Life was revealed as not being able to offer customers all the new pension withdrawal options.
Writing in the Daily Mail today, Altmann and economic secretary to the Treasury Harriett Baldwin say: “It is disappointing that some firms are lagging behind, and some providers have chosen to focus their efforts on far too narrow a range of options.
“No matter which pension provider you saved with, you should be able to use your pension how you want to.”
But in a note to “set the record straight”, the ABI says: “In any market you would not expect all providers to offer all options.
“Most insurers offer different options, such as income drawdown and lump sums; this can depend on the pension scheme and the customer’s circumstances, and customers can transfer out to access flexible products.”
Providers are not required to offer any of the new pension freedoms, but must allow customers to transfer to other providers.
The ABI also defends providers who charge customers for accessing the flexibility, as well as exit fees.
It says: “Most customers will not face any charges, and where any apply they will reflect the type of pension scheme and the customer’s circumstances.”
It adds: “Nearly nine out of ten customers eligible for the pension freedoms will not face an exit fee. Some older schemes may charge an early exit fee where customers leave before the term of the policy.
“These early exit fees reflect the expenses involved in setting up the policy, which would normally have been paid off had savers stayed in the scheme as intended to their retirement date.”
In addition, the ABI warns that pension funds should not be thought of as bank accounts.
It notes that “you cannot incur a tax liability for taking money out of an ATM, whereas you can from a pension fund” and says pension are “long term” investments for retirement, and should not be used as a “cashpoint for unlimited withdrawals”.
Since the freedoms took effect on 6 April, ABI members have received over a million telephone enquiries from customers – an 80 per cent increase on normal levels.