Some of the UK’s biggest pension providers are planning to discourage retirees from taking advantage of new pension freedoms that mean they are entitled to empty their pension pot in one go.
The pension providers are said to be acting ahead of a clampdown by the Financial Conduct Authority (FCA), which wants to minimise the risk of retirees running out of money by clearing their savings out without thought for their old age.
As of April 2015, anyone aged 55 or over has been able to access their pension savings and, if desired, spend all the money in one go. However, under the new plans, savers attempting to withdraw money from their savings will be shown how much they can “safely” take from their pension pots without running out. Individuals who ignore the advice and withdraw large amount of cash will be asked to tick a disclaimer box to confirm they understand the risks involved.
While it is thought the FCA is acting to avoid being blamed for a pensions crisis in years to come, critics claim that pension providers’ plans to “gate” pension payments are a step too far.
As former Pensions Minister Baroness Altmann commented, if some people feel their pension provider is trying to tell them what is best for them, they might just take out the maximum in a bid to feel in control.
Meanwhile, others suggested that the disclaimers could be an attempt by firms to clear themselves of blame in the event of a future mis-selling scandal surrounding the freedoms.
More than a million pension pots have been accessed since 2015, half of which have been completely emptied, according to the FCA’s own data. In 2017, £6.5 billion was withdrawn from pensions, meaning that almost £16 billion has been cashed out in total.