Although George Osborne announced in his Bugdet speech that "pensioners will have complete freedom to draw down as much or as little of their pension pot as they want, anytime they want", it is up to each pension scheme to decide whether they offer their members the new freedoms.
The analysis of over 80 pension schemes (which collectively provide pensions benefits to over 250,000 UK employees) also found that, by April, only 5% were planning on enabling members to withdraw their pension as a cash lump sum, and only 2% were planning on offering the full range of flexibilities through drawdown.
20% of schemes said they are planning on providing their members with support in moving their benefits to an alternative scheme if they wanted to access the flexibilities.
Pensions Minister Steve Webb recently revealed he is pushing the FCA to allow more leeway for pension providers to push back on clients they believe may be making poor decisions when new pension freedoms come into force.
On Monday, the FCA outlined plans to introduce additional protection for those accessing their defined contribution pension pot. Under new FCA rules, firms will be required to ask consumers about key aspects of the circumstances that relate to the decision they are making about their pension pot, including issues such as health and lifestyle choices or marital status.
Providers will be required to give relevant risk warnings, such as warning of the tax implications of their decisions, in response to answers from consumers. Firms must also further highlight the availability the government’s new Pension Wise scheme or regulated advice.
Paul Darlow, head of proposition development at Xafinity, said:
“Offering additional flexibility brings extra costs to pension schemes as well as additional risk and operational implications. Whilst many pension schemes have an aspiration to provide some flexibilities in the future, most will be unable to do so by April. This leaves millions of people near to retirement with considerable uncertainty – they have the choice between: delaying their retirement; retiring in their existing scheme and missing out on these new flexibilities; or moving their benefits into a new pension scheme in which there may be significant costs/charges.
"Our advice is that members approaching retirement with a defined contribution pension should be contacting their pension schemes now to understand their options. We would also urge pension schemes to communicate proactively regarding the new flexibilities and if/when they will be available.”
