All quiet on the pensions front?
Last month, FCA chief executive Martin Wheatley said the UK pensions sector faced a ‘Y2K moment’ come 6 April. However, while Wheatley feared the freedoms would mean up to 300,000 defined contribution retirees wanting to ‘cash in’ their pension would overload official websites and block phonelines for weeks, developments so far suggest that such worries – as with the mythical ‘millennium bug’ – may be overblown.
The official Pension Wise support site attracted over three quarters of a million unique visitors in the seven weeks after its launch, but only 1,400 telephone guidance sessions and 380 face-to-face support meetings have been booked to date. A Treasury spokesperson said yesterday that calls “have been coming through steadily, but no capacity issues have been reported.”
Many of the UK’s largest pension providers opened dedicated phonelines on Bank Holiday Monday, poised to deal with a projected deluge of requests and inquiries – however, as the day reached its conclusion, very few could report more than a trickle of contact.
For instance, Scottish Widows said it received around 300 calls from retirees. While many had questions about drawdown, very few inquired about cashing in their pension in full or in part.
Other providers tell a similar story. Aviva issued a statement this morning saying their call centres had been eerily silent for the entirety of the Easter weekend. Tom McPhail of Hargreaves Lansdown stated that the firm had received “only a couple of hundred calls so far.” Around 7 per cent of those who did contact the firm were interested in withdrawing all their money at once – 40 per cent wanted to know more about drawdown, and 17 per cent inquired about the feasibility of ‘ad hoc’ lump sum withdrawals. “It was a Bank Holiday and the sun was shining,” McPhail concludes. “The lack of calls is perhaps unsurprising.”
Fidelity Retirement Services received over 1,300 inquiries from retirees last week, but only 150 calls over the Easter Weekend. However, Fidelity did record notable confusion about the freedoms in key areas, with many who wished to ‘cash-in’ not being aware of the tax liabilities they would incur, some callers believing 6 April was the deadline for access their pension (rather than the beginning), and a “handful” of under-55s (including a 23 year old) who mistakenly believed they could access their pensions savings now too.
“Most of the customers that have called Fidelity’s Retirement Service are members of the company pension schemes we manage wanting to take cash,” says Richard Parkin of Fidelity Worldwide Investment. “Generally behaviour seems reasonable, with those wanting to cash out completely generally having smaller value pots and those with larger savings just looking to take tax-free cash. We have got a number of sizeable accounts looking to cash out completely but they seem to be the exception at this stage.”
“We have seen that misunderstandings exist. Obviously as these reforms bed in, we would expect less of this. The Bank Holiday was just the start of the new rules and it is pleasing in some ways that we did not have a mad rush as it may mean people are properly researching their options before making these important decisions.”