Save, make, understand money

Editor's Pick

Pensions…do we have lift-off?

Kit Klarenberg
Written By:
Kit Klarenberg

Despite earlier reports that it was ‘all quiet on the pensions front’, the tinderbox appears to have now exploded – and retirees are eager to crack open their savings pots.

The new tax year may have started quietly, but the Easter weekend may have proved deceptive. Retirees are now starting to consult their pension providers and advisers about their pension options, leading one firm to respond to a tenfold surge in enquiries yesterday with the immortal phrase “we have lift-off,” reporting in the Daily Telegraph.

On Bank Holiday Monday, Scottish Widows received around 400 calls – yesterday, the firm received over 3,000. Spokespeople for Prudential and Fidelity both said the firms reported double the number of inquiries compared to an ordinary Tuesday in early April.

Despite many firms drafting in specialist customer service teams to respond to the predicted upsurge of contact, some phonelines became so overwhelmed that callers could not get through for some time. Standard Life was forced to allocate a dedicated “call back” team to deal with missed contact; an independent financial advice firm in North-West England proclaimed itself to be “sinking under the weight” of customer queries.

Tom McPhail of Hargreaves Landsdown summed up the phenomenon, stating that “after a quiet, sunny weekend” things are very much “back to business…investors are clearly keen to enjoy the benefits of the new pension freedoms.” He went on to estimate that as many as 400,000 savers would take advantage of the new freedoms in the next quarter.

However, fears of widespread cashing-in of pensions appear so far to be unfounded. Across the board, it was reported that while the majority of callers were interested in withdrawal, more were concerned about whether it would be possible to treat their funds as effective bank accounts, dipping in whenever necessary and withdrawing in instalments. Those few that were interested in cashing in their pension in its entirety were less enamoured when they were informed of the tax liabilities they could face. “My office has received a number of queries,” commented David Smith of Tilney Bestinvest, “but after explaining the income tax implications, not one of my clients has decided to make a large withdrawal.”

Many retirees also contacted suppliers merely to seek advice, rather than make a decisive move one way or another. A spokesperson for LV= said that in most cases, the firm had advised callers to seek an appointment with the government’s official Pension Wise service before making a decision; those who were determined to withdraw large lump sums had also been sent information explaining how much tax they would incur in the process.