Retirement savers will have faster and cheaper access to their pension pots as the government moves to lift barriers to flexible access.
Pension providers have been criticised as too slow to release money and for imposing unreasonable early exit charges.
As a result Chancellor George Osborne announced last month that exit charges would be capped for savers looking to withdraw cash from their pensions under flexible access rules.
Economic Secretary to the Treasury Harriett Baldwin revealed the new measures, which include:
- Trust-based pension schemes to regularly report their performance in processing transfers.
- The Pensions Regulator will issue guidelines to ensure pension transfers are processed faster
- Pension Wise, the official consumer guidance body, will offer information on likely pension transfer and withdrawal timescales, what customers need to do and greater clarity on whether financial advice is required
The new measures follow an industry consultation looking at pension freedom rules were working.
New rules failing savers
The consultation revealed that flexible access rules introduced in April 2015 were failing thousands of retirement savers.
Many with pensions captured in schemes that do not offer flexible access were stopped transferring to other schemes by high charges, while others waited an unreasonable time for the transfer to go through.
The Financial Conduct Authority (FCA) found that the average transfer took 16 days, but many retirement savers were waiting up to 39 days or longer.
The FCA also disclosed that 670,000 consumers aged 55 or older faced an early exit charge to access their cash.
From these, 358,000 had charges of between 0% and 2% of the payment value; 165,000 were between 2% and 5%; 81,000 were between 5% and10%; while66,000 faced charges of more than 10%.
Consumers protected by new rules
More than 400,000 pension savers have withdrawn £3.5 billion under the flexible access pension rules.
“People should not face unjustifiable barriers to access the money in their pensions,” said Baldwin.
“We’re taking action to stop this now and to make sure people have better access to their money and more information to make informed financial decisions.”
Pensions minister Ros Altmann echoed Baldwin’s sentiments and added: “After encouraging people to save, the government must make sure consumers are protected when they come to withdraw their pensions.”
