Warnings to those planning to withdraw their pension funds
06 October 2014
The Pensions Advisory Service (TPAS) is planning to target savers who have indicated they plan to make full use of the pension freedoms outlined at Budget 2014.
Many thanks to Professional Adviser for their report on a talk by TPAS Chief Executive Michelle Cracknell:
Michelle Cracknell said the service plans to contact those who have already told their providers they wish to withdraw their funds.
Chancellor George Osborne announced in March the government would remove the tax restrictions on pensioners accessing their pension pots, effectively ending the requirement to buy an annuity.
We are really worried about people withdrawing their benefits and then trying to reverse it
From April, the taxable part of a pension taken as cash on retirement will be charged at the normal income tax rate, down from 55%.
The government also increased the total pension savings people can take as a lump sum to £30,000.
To help savers reach a decision about what to do, Osborne has promised access to free, impartial guidance for those who want it. TPAS is one of the organisations that has been tasked with delivering the guidance.
But, speaking at a roundtable event hosted by eValue, Cracknell said TPAS would not be waiting until April to begin its work helping savers figure out what would be best for them.
"What we would like to do before [then] is to try and pick up the people who have already notified their providers or their schemes that they are planning to take their benefits in April 2015. The reason we'd like to do that is we are really worried about people doing it and then trying to reverse it. If you take the money out of a scheme there is no going back. A number of people are planning to take the money out of their scheme and they are not aware of the tax implications of it."
Following the changes announced at Budget, pensions minister Steve Webb said the move would mean pensioners could withdraw their savings and buy a Lamborghini if they wished, as long as they were aware of the consequences.
Cracknell said TPAS is running three pilot schemes around which it will frame its guidance.
An initial pilot in partnership with provider Legal & General has begun, while the second is currently underway with an as yet unnamed client, Cracknell said. The pilots will test how many people take out the guidance, what sorts of questions they ask, how long the average call takes and how this matches up with TPAS' experience.
Eventually TPAS wants to look at three different pension schemes to contrast its experience with people coming out of contract based schemes and people coming out of trust schemes, she said.