Pension firms state they are not prepared for Aprilís pensions revolution, sparking war of words with the Treasury
The greatly heralded Coalitionís ëpensionís revolutioní is but 5 months away, however the government has been dealt a resounding blow as providers state they will not be in a position to enact the reforms by next year.
The news has filtered through a report from the National Association of Pension Funds (NAPF), which represents 1300 pension schemes that account for over 17 million savers, in which pension firms have collectively written up a list of 101 unresolved issues heavily implying that thunderbirds are not go for April 2015.
This is the time that George Osborne has sworn to savers over the age of 55 that they will be afforded ìgreater freedomsî regarding their handling of their pension pots, with the scrapping of the obligatory annuity ñ lifetime income ñ at the heart of these reforms.
At present, pensionersí hands are tied, as they must pay a 55% tax if they seek to withdraw the lump sum of their amassed pension pot. Under the new rules, however, over-55s will be able to draw funds from their pension pots subject to the rate of tax they paid whilst employed.
Moreover, they can withdraw their money in portions as opposed to a lump sum and 25% of each of these portions will be tax-free, underscoring the greater degree of flexibility that will be enjoyed by the elderly following April.
As such, fears have heightened amongst previously hopeful soon-be retirees that they will be subjected to the same hefty tax rates and inflexible annuities that pensioners have endured for eons.
Graham Vindler, director of external affairs at the NAPF, inferred that the consensus amongst the public that they will be able to access their pension pots like a bank account is unfounded due to time constraints.
Vindler said: "It is inconceivable that all savers will have full flexibility over how they spend their pension, as they have been led to believe.
ìWith only five months to go, it is too late for the Government to change the date as people have already started arranging their retirement around it, so their options will be very limited.î
This viewpoint is also adopted by Raj Mody, partner at PriceWaterhouseCoopers, who said:"Savers expecting to use their pensions like a bank account in April are going to be very disappointed, as pension firms are simply not going to magically transform over the next five months."
Amongst its 101 unresolved issues, the NAPF include a vagueness surrounding the Chancellorís pledge to offer money guidance to new retirees regarding their pension freedoms.
Osborne unveiled Citizens Advice and the Pensions Advisory Service as the two providers who would be offering face-face sessions and telephone guidance respectively.
The NAPF contend the legitimacy of this though, implying government has bitten of more than it can chew, has not struck any concrete deals with these parties and ìfaces a huge challenge in having the required structures and frameworksî to deliver on these free guidance sessions.
The NAPF also took issue with the potential impact of fraudsters exploiting the vagueness surrounding new rules to the publicís detriment, the ability of many to pay for full financial guidance which could cost up to £1000, a lack of choice being proffered to pensioners next year combined with poorly regulated products flooding the market, doubts over the ability of HMRC to identify over 55s who have gone over their annual tax allowance and a number of other loopholes that creditors & other cutthroat professionals could take advantage of shafting pensioners out of vast amounts of their pension pots.
However, the treasury has renounced these claims, insisting that the NAPF are merely stirring the pot, as the implementation of pension freedoms next April does not benefit their agenda.
A spokesman for the treasury said: "These concerns are ill founded and border on scaremongering," a spokesman said.
"Many of the questions raised have already been answered by command papers, draft regulations and legislation that is being considered by Parliament."
"Other questions in the list are not relevant to the reforms announced at Budget. These reforms are supported by the vast majority of pension providers and consumer groups."
Find out more about pensions with MoneyExpert.