Savers could face heavy penalties under the changes to pension flexibility, Gregg McClymont has warned.
Speaking in a session of parliamentary question time, Mr McClymont, Labour MP for Cumbernauld, Kilsyth and Kirkintilloch East, and shadow work and pensions minister, called on the department for work and pensions to simplify things for pensioners.
He said: “The government has changed the rules on pension flexibility at retirement, or is in the course of changing them, yet there are members of pension schemes who will face huge exit penalties if they wish to take advantage of those flexibilities.”
He asked pensions minister Steve Webb: “Does he think pension savers in that situation will be comforted by his saying today, ‘Well, they entered into a contract and they have to put up with it’?
“The government is changing the rules, so surely those savers deserve to be able to take advantage of the flexibilities just as much as anyone else.”
However, Mr Webb said: “I do not think that the honourable gentleman in his heart of hearts really wants these flexibilities.
“We announced in the Budget the flexibility for people to access their money at 55, in full and in cash if they want to do so. Clearly a minority of schemes – and it is important not to exaggerate the scale of this – have contractual terms that relate to the basis on which money can be withdrawn.
“We are not overwriting the rules of existing schemes, but we are talking to the industry to ensure that as many people as possible can access their cash.”
Mr McClymont’s question came as self-invested personal pension provider Talbot and Muir claimed the raft of changes, which are due to come into effect 6 April 2015, have caused advisers and clients to “second-guess further changes”.
Claire Trott, head of technical support for the firm said: “Advisers I have been speaking to, who have clients at or nearing retirement in the next few months, are struggling to put together full recommendations for their clients. This is because of pending legislation and announcements from the government.”
Adviser view
Leigh Clayden, director of Ipswich-based Clayden Financial Planning, said: “We have some clients for whom small changes in the draft legislation would have a significant effect on the advice we are giving. We have the option to wait for the legislation to go through, with the risk of running out of time to implement our recommendation, or give advice now with additional disclaimers regarding the possibility of changes before the end of the tax year.”
