PENSION savers are resisting the urge to make a “mad rush” for their cash after new flexibilities came into force, according to financial firms.
Firms taking calls from people keen to make the most of the new retirement freedoms, which started on Monday, said that in general savers appear to be behaving “reasonably” and are taking time to consider their options.
Those wanting to cash out completely have smaller potsRichard Parkin
Richard Parkin, head of retirement for Fidelity Worldwide Investment said call volumes were fairly low over the Easter weekend, although last week had seen a significant increase.
He said: “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.”
Mr Parkin continued: “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.”
The new rules mean the 320,000 people who retire each year with a defined contribution (DC) pension are no longer required to use their pension pot to buy a retirement annuity, which gives a guaranteed regular retirement income.
Instead they can take their pot in one go or use it like a bank account and withdraw cash in slices. People aged 55 and over will only pay their marginal rate of income tax on money they withdraw from their pension and the first 25 per cent of the pot is generally tax free.
But concerns have been raised that some people may fall prey to scams, run out of money too early, or not realise the tax implications of withdrawing money from their pots.
Fidelity said it had received just under 1,500 calls over the last week from people putting in expressions of interest, of which only around 150 were over the Easter weekend lull. The company had received another 50 calls by around 10am yesterday.
Scottish Widows is expecting two years’ worth of queries in the next couple of months as people respond to the reforms.
It has taken on extra staff to help deal with the 350,000 extra calls it is expecting and said it received around 400 calls over the Easter weekend.
Everyone eligible for the freedoms will be offered free, impartial guidance under the branding Pension Wise. The service is being delivered face-to-face by Citizens Advice, on the phone by The Pensions Advisory Service (TPAS) and online by the UK government. More than 750,000 people have visited the Pension Wise website since it opened seven weeks ago and the Pension Wise helpline has handled around 3,600 calls.
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