The retirement hopes of millions may be dashed by providers blocking their bid to drawdown cash under the new flexible access pension rules.
Industry experts are warning providers are not ready to switch on flexible access in April 2015 because their computer systems are not up to the job.
Actuaries Xafinity quizzed 80 workplace pension schemes about their plans to offer flexible access drawdown – the government’s new rules that let pension savers take their cash as lump sums to spend how they like from the age of 55.
Only 5% confirmed they were planning to allow retirement savers to drawdown their money and only 2% were going to offer the full service.
However, a fifth agreed they would help pension members transfer their cash to other schemes that will allow flexible drawdown.
Financial limbo
The firm’s Paul Darlow said: “Flexible access piles up the costs for pension schemes, complicates their administration and exposes them to financial risk.
“Many are enthusiastic about wanting to offer flexible access but few will be in a position to do so when the scheme starts in April.”
The news leaves millions of retirement savers in financial limbo.
If they were counting on taking cash from their pensions to pay off bills or reinvest, they are now faced with financial uncertainty.
Rather than pension freedom, they face difficult financial choices.
“They have to decide whether to leave their pensions in place and wait to see what happens, delay their retirement or move their money,” said Darlow.
Pension meltdown
“Transferring to another scheme could take several months and may mean a reduced pension fund.”
The firm suggests retirement savers with plans to drawdown cash should contact their pension provider as soon as possible to see whether they are offering flexible access straight away or what their plans are.”
The report suggests millions will be disappointed that their financial plans for retirement are disrupted.
Trade body the National Association of Pension Funds has indicated that many savers will have to wait at least a year for their pension providers to catch up with flexible access.
Many large providers, such as Aviva and Scottish Widows, are taking on hundreds of extra customer service staff in readiness for a ’pensions meltdown’ in April as retirement savers rush to take advantage of the new rules.
