The Association of British Insurers has defended its members in a statement explaining some of the popular misconceptions experienced by pension providers since the at-retirement reforms.
There has been widespread criticism of insurers in the wake of reforms over issues ranging from delays to allowing access to not offering the full suite of options, including from the new pensions minister Ros Altmann.
Seeking to counter what it described as “misconceptions” since the rules came into force, the ABI issued a statement yesterday (10 June) which admitted the access overhaul presented a “challenge” but that companies were actually dealing well with unprecedented demand.
In the first month since their introduction on 6 April, ABI members have dealt with just over one million phone enquiries, an 80 per cent increase on what they would normally expect, it said.
Yvonne Braun, director for long term savings policy at the industry body, stated that the vast majority of customers have been able to access their pot, but admitted that the biggest overhaul of pensions in a generation being introduced in just a year was always going to be a challenge.
“It is important to remember that there is no one size fits all option, especially for those customers who may have valuable pension guarantees or who could be facing tax liabilities, which is why the industry is encouraging people to contact the free, impartial Pension Wise service for help in assessing their options.”
Last week Friends Life attacted criticism when it wrote to 1,300 customers who had requested partial pension withdrawals to tell them that the promised roll-out of a flexi-access drawdown option is no longer going to be take place due to the complexity of its pension back book.
The ABI stated the majority of insurers offer partial withdrawals such as drawdown, but added that “in any market you would not expect all providers to offer all options”.
The range of options offered can depend on the pension scheme and the customer’s circumstances, with the association pointing out that customers can transfer out to access flexible products.
Offering consumers to transfer out is also controversial, as some policies include early surrender penalties which are unlikely to be waived and can on some older products represent anywhere up to 20 per cent of the pot.
Responding to consumer questions about fees some have faced to access their pension pots, the ABI again said that most customers will not be charged to exit and where any apply they will reflect the type of pension scheme and their individual circumstances.
“Nearly nine out of ten customers eligible for the pension freedoms will not face an exit fee,” the guidance added.
“Some older schemes may charge an early exit fee where customers leave before the term of the policy,” it continued, explaining that the fees reflect the expenses involved in setting up the policy, the cost of which may have been built into premiums to be fully repaid by maturity.
On the broader issue of cost, the potential to introduce caps on drawdown charges was debated in the House of Lords this week, with Conservative minister for welfare reform Lord Freud stating that the government would wait and see how the market develops.
“It has only been going for two months and if it looks appropriate we will introduce charge caps,” he said, adding “We are meeting the industry and working with them to make sure they do produce the right level of charging and we are able to monitor that.”
Trades Union Congress’ general secretary Frances O’Grady called for government action to stop people being hit with “rip-off charges that eat up their retirement savings”, calling the reforms an “ill-thought experiment with Britain’s pension pots”.
peter.walker@ft.com
