A Ministerial enquiry has been ordered to investigate the obstacles and rip-offs millions of savers are facing, with the Work and Pensions Secretary, Iain Duncan-Smith, writing in the Daily Telegraph: “I have a message for those firms: it is your responsibility to sort this out and look after your customers. After all, it is their money that you hold, not yours.”
He also warns that he is ready to “name and shame” the firms giving customers poor deals. The Telegraph also highlights some of the frustrations savers are facing, and areas that the Government will be focusing upon during their investigation. These include:
- Three million people with company pensions are blocked from using their funds like bank accounts and around two million cannot cash in their funds at all, with some employers prevented from offering the freedoms by red tape and others deeming it “too expensive”.
- Between 500,000 and a million people sold private pensions by doorstep salesmen in the Seventies, Eighties and Nineties face fees of £1,000 for advice to access their money due to a detail hidden in the small print.
- Major companies including Aviva, Aegon, Royal London, Prudential and Zurich require savers to pay advice fees to use the most advanced form of the freedoms, called “flexi-access drawdown”.
- Around 350,000 people aged 55-65 face reductions to their funds if they cash in, with “exit penalties” as high as 20 per cent.
- Middle-class savers are missing out on thousands of pounds of tax perks because they are forced by some companies, including Scottish Widows, to take the 25% tax-free lump sum up front, even though the Government allows savers to spread the money over retirement.
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