Although Pension Freedom is here you may be Unable to Access your Cash
Pension Freedom has shaken up how we view and access our pension funds. Whereas prior to April you could only withdraw your funds via an annuity, now you can draw down as much as you want to, 25% tax free. That said, only a handful of pension companies are offering this facility at the moment.
If you are lucky enough to have a pension with one of the few firms who will offer you a drawdown option then great. You can access your money for a variety of reasons from buying a performance sports car, to paying for your grandson’s university fees. For the rest of us however, we are stuck in the old annuity system.
In an article which appeared in the Daily Telegraph prior to April 2015 when Pension Freedom went live, several firms revealed they were not going to facilitate Pension Freedom options.
Legal and General and LV both stated no back account style options would be available. Although Legal and General did say that they savers could withdraw two partial lumps sums of £5,000 minimum, providing the remaining funds were above £5,000.
Pheonix and Aegon said they would charge on each cash withdraw in addition to existing charges. Pheonix hinted that extra charges would almost certainly apply if another company was involved in the administration of your pension.
Pheonix and Friends Life were undecided on whether to allow the new and beneficial ‘death tax’ rules. Most firms were of the mindset to allow it.
Although this make quite grim reading it is clear that many pension companies are developing new tools in wake of Pension Freedom, and a spokesperson for Friends Life said: “We are in the process of developing new solutions for customers so that they can enjoy the new flexibility available to them.”
This all sounds promising but if you were relying on being able to access your pension fund for big outlays, you may well have to wait a considerable amount of time. This may not be so bad if you are fifty-five, but what if you’re in your sixties? A year or two wait is hardly a thrilling prospect.
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Source: The Daily Telegraph