Pensions minister Steve Webb has suggested insurers will not be forced to amend contract terms which impose high exit charges amid concern some savers will effectively be blocked from accessing new freedoms announced in the Budget.
From April next year, savers will be able to withdraw their whole pension pot as cash from age 55.
Last month, Money Marketing revealed savers with old-style pension plans could face severe penalties if they want to transfer to a new policy to take advantage of the changes.
During Work and Pensions questions in Parliament today, shadow pensions minister Gregg McClymont asked what the Government was doing to ensure “huge exit penalties” would not stop some being able to make use of the new rules.
Webb said: “It is important not to exaggerate the scale of this, but clearly a minority of schemes have contractual terms which relate to the basis on which money can be withdrawn from those schemes. We are not overwriting the rules of existing scheme but we are talking to the industry to ensure as many people as possible can access their cash.”
Webb also defended the “no limits” guidance guarantee which savers will be able to use as many times as they want once they reach 55.
Labour MP Robert Flello said concerns remain over various elements of the proposal, including the industry levy that will fund it and whether it would be ready by April next year.
Flello said: “The pensions industry still expresses concerns about funding the guarantee levy, whether the service will really be ready in time and how the scheme will operate. From the consumer perspective, I believe there are still widespread concerns about how the scheme will operate and whether it will be ready in time.
“Given [choosing a pension] is one of the most important decisions people will face and there is real concern they will receive guidance and think it is advice, or that the guidance won’t be comprehensive enough, what is the minister going to do to make sure this works properly and quickly?”
Responding for the Government, Webb said: “We are very actively engaged in making those preparations. It is a tight time scale, we entirely accept that. But I would contrast what we are proposing with the current situation where hundreds of thousands of people reach an age to choose whether or not to buy an annuity and get no guidance, advice or help whatsoever.
“This proposal will be free, it will be independent guidance for people [which is] face-to-face if they want it. It will be a vast improvement.”