Dear Chancellor of the Exchequer & Minister of
State (DWP),
I am writing to ask you to stop pension savers from being
exploited by insurers under the upcoming pension freedom changes by
introducing a single change in the budget.
Under pension freedom rules pension savers will from
April have the opportunity to access their pensions via flexi-drawdown
or lump sum withdrawals (UFPLS - uncrystallised funds pension lump
sums).
The insurers and other pension providers are not required to
offer these facilities in recognition of their ageing technology not being able
to facilitate these changes.
The insurers will allow savers to transfer to modern schemes
that can facilitate the transfers. Herein lies the problem!
Nearly all personal pension contracts written since the
1970s, up until the implementation of the FSA retail distribution review in
2013 have punitive exit penalties. These are contractual penalties
that significantly reduce the value of the pension savings (typical penalties are
thousands of pounds). The money taken from savers by insurers becomes
profit for them and acts as a disincentive for them to facilitate the new
pension freedoms.
I propose the following simple rule change that will protect
pension savers, increase the tax take and boost consumer spending
without costing the government anything:
“For all pension contracts over 5 years old the transfer
value of the pension must be equal to the value of the investments held.”
This will ensure pension savers can access their pension
savings under the pension freedoms without being unfairly penalised because of
very expensive old fashioned pension contracts.
I urge you to act now to make this change in the 2015 budget
and ensure that pension savers get a fair deal rather than insurers making
profits at their expense.
Best regards,
Simon West
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