Which? analysed the impact of charges ranging from 0.5 per cent to 2.75 per cent on someone with a £36,000 pension pot who wanted to withdraw £2,000 a year. What impact do higher charges have on your pension pot? 'That’s why we want the Government to take action to secure better pensions so people have just as much protection when they take money out of their pension as when they put money in.'
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Which? executive director, Richard Lloyd, said: 'It’s right that the Government is giving people the freedom to decide how and when they access their hard-earned pension savings, but deciding how to use these savings in retirement is one of the most complex financial decisions many will have to make and one they cannot afford to get wrong. It said the Government should consider whether to 'default' consumers who don’t make an active choice to its own scheme. Which? has launched a campaign called Better Pensions, calling for a cap on drawdown charges and for the creation of a Government-backed drawdown scheme 'to give everyone access to a good value, low cost product no matter who their pension provider'.
They don't apply to those with more generous gold-plated 'final salary' pensions which provide a guaranteed income after retirement. The changes apply to people with 'defined contribution' or 'money purchase' pension schemes, which take contributions from both employer and employee and invest them to provide a pot of money at retirement. Instead, Chancellor George Osborne has announced that people will be able to dip in and make as many withdrawals as they want, each time getting 25 per cent tax-free and the rest taxed like income. Key changes include removing the need to buy an annuity to provide income until you die, giving access to invest-and-drawdown schemes previously restricted to wealthier savers, and the axing of a 55 per cent 'death tax' on pension pots left invested.Īlso, savers won't be limited to one chance to take a single tax-free lump sum worth 25 per cent of their pension pots, with the rest taxed as income afterwards. 'Pension freedom' reforms will give people greater power over how they spend, save or invest their retirement pots from April.
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