Savers are facing a two week wait to access pension freedoms next April as providers reveal their expected processing times.
Insurers warn customers they will not be able to use pension pots like bank accounts as they deal with administrative burdens to release cash.
Legal & General and Aviva customers looking to withdraw cash from their pot next year face waiting times of at least two weeks. Aviva says the processing times should fall after initial volumes die down.
Royal London says it takes one week to set up drawdown facilities at the moment and it expects that to continue next year. Prudential said it was too early to determine time scales but said pension pots are not designed to be instant access.
It comes after Treasury officials suggested the use of uncrystallised fund pension lump sums will allow savers to use pots like a bank account.
But savers face a number of hurdles to accessing their pots, such as contacting all of their other providers once they have accessed the freedoms through one scheme.
If other providers are not informed then savers could be hit with an initial £300 fine, rising by an extra £60 a day with no cap. In addition, savers risk a £3,000 fine if any information submitted to providers is incorrect.
Speaking at the Taxation of Pensions Bill committee hearing yesterday, L&G pensions strategy director Adrian Boulding said: “We will not be providing a cashpoint card or a hole in the wall. A pension scheme is not like a bank account. If you want to take money out, even under the new flexibilities, you have a raft of HMRC paperwork to go through, and it will take at least a couple of weeks to get the money out.
“I think consumers have been given completely false expectations by the media, and that will eventually come home to roost.”
Standard Life head of pensions strategy Jamie Jenkins says: “Setting up drawdown at the moment is more complex and involves advisers, so it can take up to a couple of weeks but we intend to reduce that to a few days for all types of freedoms exercised next April. That’s the plan and we are on track.
“There are some additional issues depending on what the person wants to do but we are trying to figure out ways of automating that and making it more efficient. We recognise drawdown in its current form is moving to a mass market.”
A Scottish Widows spokesman said: “We are working towards ensuring that all our pension customers can enjoy the new freedoms they will be entitled to in April next year. This involves simplifying and speeding up our processes to ensure this happens to the standards Scottish Widows customers expect.”
A Prudential spokesman says: “Pension products have not been designed to be used on a instant access basis. We welcome the flexibility pensioners will enjoy under the reforms and are investing to support customers who will want to make use of the new changes.
“It’s too early to say what these processes might look like or the exact timescales involved. Constantly accessing a pension fund designed to provide an income in retirement may, for example, have tax implications which makes the comparison with bank accounts potentially misleading.”
|How long will savers have to wait to access pension pots?|
|Aviva||At least two weeks but declining over time|
|Legal & General||At least two weeks|
|Standard Life||A few days|
|Scottish Widows||Under two weeks|