With just over two months gone since the new pension freedoms were introduced, those with defined contribution pension schemes, also known as money purchase plans, can now dip into their retirement saving or blow the entire pot from the age of 55.
Feedback from our IFAs suggests that the biggest reason for transferring a pension is not the levy of the high pension charges, but inflexible pension schemes that do not allow this new facility which allows you to dip into your retirement savings as and when you feel like it.
Sharad Champaneria, an IFA at BDWM, said this week that the biggest reason for transferring pensions is that the majority of pension policies do not reflect the new law that came into effect in April 2015. “It seems that the law has changed but the vast majority of existing pension contracts have not and do not offer a flexible pension draw-down type facility. Some providers offer flexible pensions that permit income draw-down. But to access a flexible pension scheme would mean transferring the pension policy to alternative plan before you can access the cash in your pension. And this, would require financial advice fees,” he said.
It seems that in order to gain access to a pension that allows flexible access you are going to have to pay a financial advisor at some point. So even if you are some years away from retiring, you may as well get a modern flexible pension plan with lower annual management charges to lock in the savings before your retire.
The scale of providers not allowing full flexible is pretty widespread. In a survey by Xafinity reported in an article headed “We can’t get pension cash complain some over-55s” stated that only 5% of providers allow “full pension flexibility”. Indeed, The Association of British Insurers (ABI), said transferring would be the best option for many. “Customers can access flexible pension options but may need to transfer first,” said a spokesperson for the ABI.
Ryan Mellor, Co-founder at IFA Direct Home
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