Related Wills & Probate News
Fees will Wipe 27% off new 'Flexible' Retirement Pensions, Savers Told
Savers who take advantage of new flexible pensions in 2015 face losing more than a quarter of their money to charges, it has been revealed.
The Telegraph reports that from next April, the over 55s will have full discretion over the use of retirement funds, taking as much as often as they like.
Chancellor George Osborne said savers will no longer need to buy annuities, after an official study found thousands of older people were being short-changed.
However, a new report has raised concerns that savers face losing money from the type of pensions to be used under the reforms.
Professor David Blake, an academic at Cass Business School, will call on pension companies to declare how much they plan to charge savers who regularly make impromptu withdrawals.
"Sensible people who are trying to make their pension last are the most at risk from high charges, as over a 20-year horizon, large sums could be removed from their funds,” he told The Telegraph.
The type of retirement plans pension companies have said they will offer next April are called "flexible drawdown" policies.
Research by The Telegraph found firms would typically charge more than £300 to set up this type of plan, where the money stayed invested in the stock market as customers made withdrawals.
Savers faced £400 a year in administration fees, with some companies intending to charge £30 for every "unplanned" withdrawal.
It was also revealed that customers would also lose around one per cent of their fund each year to investment management fees.
As a result, the plans would work out relatively costly for savers with smaller or subsidiary pension pots.
Figures calculated by the House of Commons Library, an impartial research service for MPs, found charges would wipe 27 per cent off the typical fund invested in the plans throughout retirement.
Alan Higham, director of pension company Fidelity, said: "Savers will need to be extremely careful because it will be difficult to spot bad value on these type of "bank account" products, as there are hundreds of different charges to compare."