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Govt eyes scrapping transfer rules to ease freedoms blockage


The Treasury is considering removing historic restrictions on pension transfers as part of a drive to help savers access the new pension freedoms, Money Marketing understands.

In recent weeks the Government has come under pressure as pension savers have found it more difficult than they expected to use the flexibilities.

Last week, Chancellor George Osborne announced there will be a July consultation designed to “strengthen people’s rights to access their pensions flexibly” and remove any “unjustifiable barriers to doing so”.

The Finance Act, which took effect in summer 2004, removed stringent requirements on members with entitlement to higher tax free cash who wanted to transfer to new schemes.

Previously members could only retain their rights to greater than 25 per cent tax cash if they bought an annuity with the remainder, or transferred to another scheme. However, rules required the member to find a “buddy” to make a block transfer at the same time.

But the transfer had to complete before 6 April 2015 and customers must take benefits by 5 October this year. Providers called for an extension of the relaxation, but the Government decided against it.

In addition, rules require transferred funds in drawdown to go into a “new arrangement”, to ensure customers stay within capped limits, making it difficult to merge existing drawdown pots.

Money Marketing understands policymakers are now considering abolishing both of these requirements, with changes likely to be announced in next month’s Budget.

AJ Bell technical resources manager Gareth James says: “Elements of the pensions legislation have acted as a barrier to some transfers for nearly a decade.

“Scrapping either of these requirements would allow simpler access to the pension freedoms for many.”

The emergency Budget will take place on 8 July.



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There are 13 comments at the moment, we would love to hear your opinion too.

  1. The blockage is being caused from a lack of understanding of who to speak to and providers not having resources in place to meet the demand when clients try to get thorough .

  2. Is it me or is there a fundamental lack of understanding within government circles about pensions!

    It’s okay giving unfettered access to pension pots we support that move but some old pension pots have important guaranteed contractual rights which consumers should not just wave away willy-nilly.

    What advises in the pension industry are scared of is not pension freedom we are scared of claims management firms sticking in complaints when people run out of money. See we now live in a culture where it is always somebody else’s fault and what is needed here is clear rules where if a client wants to go off and spend all of their money a clear precise declaration is signed where clients cannot later complain that they were mis-advised.

    I don’t see that ever been put in place so advisers will be forced to adhere to financial planning principles, see it is our signature at the bottom of the paperwork not the governments.

    Really do wish government ministers and local MPs go and have discussions with local AUTHORISED financial advisers to get our opinions rather than just taking anecdotal evidence from either large providers, ivory tower FCA chiefs, or dare I say it unregulated journalists! The real world is very different!

  3. Christine Brightwell 25th June 2015 at 11:41 am

    Peter, spot on, the lack of understanding is legendary – and the ability of the chancellor to open his mouth on the subject of pensions without taking advice, or if he has, failing to read or understanding it likewise.

  4. I get the very distinct feeling George wants his tax and wants it now, and pension legislation and advisers are the stumbling blocks

    You cant circumvent either in its present form, so something has to give and that may take form in some pretty scary changes to the rules ?

    I welcome any changes to the current status quo as its all unbearable, however like most people I and my business needs to be protected, and I don’t mean from my own advice that I give but that of others.
    Now there is the elephant in the room which neither government or the regulator cares about because they have unlimited access to my bank account !

  5. Surely with the demographics of life expectancy it would be prudent to adapt pension rules to ensure pension income lasts a lifetime.

    Someone remind again me who made these silly rules, George or Ozzy Osborne!!!!

  6. @DH

    First sentence – quite so. Spot on. How redolent all this is of the adverts of chains and pensions back in the PP/Contracting out era. That of course ultimately led to a lot of grief. This stuff will no doubt reap the whirlwind in years to come. As has been said – ‘be afraid, be very afraid.’

    The Government won’t take the blame – but in our compensation culture someone undoubtedly will. Step forward providers and advisers.

    That’s not to say that individuals shouldn’t be free to manage their own pensions, transfer them, take the TFC – but trashing the cash is entirely another matter. In another 5 or 6 years when interest rates will be above 3% and markets have calmed will annuities become more attractive? What then of these ‘freedoms’?

  7. This an example of cynicism at a very basic level.

    Osborne wants money now, at any cost.

    The rationale is as follows

    Encourage people to draw their entire pension fund – he gets his income tax now.
    Encourage people to seek advice and then claim for misspelling
    FCA is encouraged to clamp down on bad freedom advice.
    FCA raise huge fines and these go to the Treasury

    Personally I would urge all advisers to ignore all but the cat iron nailed on cases for freedom and let the Government carry the can for a change.

    Ian Coley

  8. I totally agree with Peter’s comments. (I might even copy them to my local MP who has become one of David’s new Ministers. Is that OK with you, Peter?)

    Meanwhile I’ll turn away prospective clients who want to blow it all on something frivolous only then to depend upon the State (and me, the taxpayer) in their old-age.

  9. @Ian Coley
    >>Encourage people to seek advice and then claim for misspelling
    I claim my £5!

    I’m not an IFA, so this may seem very naive, but couldn’t the FCA produce an official ‘Insistent Client’ document/register that the Client would have to sign and register before any transaction is implemented that flies in the face of your IFA advice?
    The client gets to excercise their freedom (right or wrong) but you don’t lose a client in the process and don’t have to worry about future repercussions.

  10. Philip Spierling 25th June 2015 at 4:20 pm

    Peter Herd has put it down perfectly in a few paragraphs.

    Bang on target Peter.

  11. As I have tweeted and emailed repeatedly to people who know who they are, I suggest reading The Blunders of our Governments by Anthony King and Ivor Crewe.
    Chapter 5 pensions mis-sold. Some will know it well and it will be a parallel world to the present for others. But is is scarily prescient (as some of us know of course).
    Then the analysis of the reasons for all the particular Blunders in the book (some others are fascinating too) in Chapters 16-27. The headings give a good sense of it.. Cultural disconnect; Group-think; prejudice and pragmatism; operational disconnect; panic, symbols and spin, the centre cannot hold, musical chairs, min stress as activists, lack of accountability, a peripheral parliament, asymmetries of expertise, a deficit of deliberation.

  12. Mark Coomber

    Yes of course if it helps raise awareness.

    The thing that really gets me at present is that we are getting so much noise from journalists, large providers with vested interests and of course don’t get me started on the execution only providers who simply want to maximise profit just as the government wants to maximise its tax returns. It’s us the financial advisers who are having to deal with the reams of paperwork, needless to say there’s a queue of journalists stating that none of us do any real work after all.

    Why is it that people like Martin Lewis were asked to attend Treasury select meetings and even be placed on the new challenge regulator board without holding a single qualification in financial services and never given personal pension and investment recommendation. See that’s the thing politicians and regulators were too busy on creating new phrases or expressions to circumvent regulated advice they forget that the numbers of people that are actually doing the job are at a all time low.

    I’ve actually started training new advisers a daunting task I wonder how many other small practices are doing the same not many I would imagine.

    It’s about time the government and regulator woke up and started supporting adviser community rather than trying to give us a kicking all the time.

    One final comment if we are going to go down this road of execution only business then I for one want to see a separate fee category entirely for both FCA and FSCA fees because I do not see why I should pay compensation for the reckless business plans of companies that will make billions only to potentially end up with claims on FSCS. We have already seen a small example of this with unregulated products so why should we allow this to happen it on greater scale for so-called simplified or non-advice sales. Next miss-selling scandal definitely!

  13. Government needs to change this stupid requirement for pension savers to take advice regarding moving their savings from any Db or Dc to other schemes, which the saver chooses to do….Pension savers at the outset beginning of their chosen scheme have no such requirement to take advice, so why when they are over 55 do they need to…Its their savings to do what they choose to with it…Savers are not going to blow their lifetime savings just because they can..Stand up George and remove this stupid requirement now…Let savers have their choice of freedoms as Conservative voters…And not the Nanny state like Labour & Libdems…bah humbug!!!!

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