Pension tension over new government rules
Despite the government saying that the retired can delay any decisions about their pension until after big changes are introduced next year, pension companies are still forcing people to buy annuities if they withdraw a lump sum.
At the moment, when you retire, you can withdraw a quarter of your pension tax free, so you can buy a caravan, or nipple clamps, or start a new life onboard a Saga cruise ship, wearing lemon coloured casual wear and goosing waiters at the buffet.
You used to be given a period of six months to figure out what to do with the rest of it, so you were either offered a choice of buying an annuity, or leaving the fund alone and drawing an income. The government has extended that period to 18 months, to make sure people can get the most of new rules which remove restrictions on pension funds.
But the big pension companies are giving retirees a hard time and persuading people to take on annuities when they withdraw their first quarter. And apparently this is because - although government rules have changed - it failed to actually consult the industry, who are struggling to play catch up.
Tom McPhail, head of pensions at Hargreaves Lansdown said: ‘Just because the chancellor tells investors that they can take their tax-free lump sum and defer doing anything with the rest of the money, it doesn't necessarily mean that pension companies can actually accommodate such requests when investors ring up and ask to be able to do this.’
So if you’re about to retire – maybe don’t put a down payment on your Harley Davidson just yet.