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.