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ABI clashes with pensions minister over freedoms access

Huw_Evans

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.

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Comments

There are 10 comments at the moment, we would love to hear your opinion too.

  1. Good for the ABI. Some straight talking to the politicians who made all of these ridiculous promises and now expect massive IT/systems costs to be expended so that they can appease the electorate. Should other policy holders or shareholders be expected to pay for all this “freedom” or the people exercising their “rights”. There will be many lining up to have a pop at the Insurers and as usual “why let the facts get in the way of a good story.”

  2. @Tim

    Agree wholeheartedly. The problem with Government (all of the blighters) is that they automatically presume that everyone is there merely to do their bidding. Never mind if you run a business – you are now a branch of Social Security – not only collecting Tax and NI but now doing the Government’s job in providing pensions.

    If you are a pension company you are expected to jump to it when the numpties come up with their weekly brainwave.

    That some firms want no part of these new provisions is no secret and is their prerogative. After all you can always transfer elsewhere if you want to trash the cash – at a significant cost no doubt. But at least the company by being disobliging doesn’t run the risk of fielding complains later.

  3. A big “well done” to the ABI. Sometimes I wonder if the decision makers even live on the same planet as those of us that work in the financial services industry?!?! Next time I go to Tesco I will make sure that I ask them why they don’t sell Sainsbury’s products too!!

  4. Richard Anderson 10th June 2015 at 5:51 pm

    It’s laughable the comments made by so called professionals. The law has changed and therefore insurance companies who paid excessive commissions are now having to face facts they do not like and are trying to claw back these excessive commissions.
    The next step is to change the law to ensure these companies have to deliver the will of the people.
    The IFAs commenting have a vested interest in making it very difficult for joe public. Not everyone is unintelligent and does not know what they are doing.

  5. Long live Annuities

  6. ..and Equity Release

  7. To paraphrase another well known saying ‘Those that can run a business whilst those that can’t get into politics’.

    The case in question at Friends Life involved just 1,300 people so why FL should spend a small fortune on new IT systems for this small number I don’t know; these people do have the option of transferring elsewhere after all!

  8. @ Richard Andersen please can you supply readers with a list of all other historic contracts that you would like the law to change?

    Your assertion that IFAs have a “vested interest in making it difficult for Joe public” is just plain wrong I am afraid. The role of the professional adviser you criticise here is actually the opposite. It is to take the complexity introduced by the very lawmakers you ask to back date change to contract law and turn it into something Joe understands.

    Historic levels of commission (excessive or otherwise) do impact upon the new freedoms but as the ABI spokesman explained very clearly almost 9/10 people are unaffected by exit charges.

    if there is something worth laughing at it is the opinion of those whose views are based on perfect 20:20 hindsight

  9. Douglas Baillie 11th June 2015 at 1:29 pm

    This is all about the ‘nanny state’ and giving people politically attractive ‘pension freedoms’, whilst simultaneously offering them the unending right to complain to FOS at any date in the future when they run out of money.
    I am already reviewing the list of ‘policy exclusions’ that are likely to be applied to my PI insurance policy at renewal date, as anything to do with pension transfers and insistant clients are very likely to be heavily amended.

  10. @ Richard Andersen.

    You would do well to heed the wise words of Nick Bamford.

    As to your assertion that “Not everyone is unintelligent and does not know what they are doing.” You are no doubt technically correct, but those that do are the tiniest of tiny minority. I’m afraid for the 99.99% they in the main have difficulty in counting past 20 once they have removed their shoes and socks.

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