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06 Aug 2014

Over 55s Charged Exit Fee To Access Pensions

Chancellor of the Exchequer George Osborne has been commended for his recent pension reforms, which allow people aged 55 and over to legally access their pension funds without having to buy annuity. However, according to The Telegraph´s senior political correspondent Christopher Hope, some cracks in the legislation are beginning to show.

It has recently come to light that the Treasury will not force pension companies to introduce the new rules, whilst some may not even have the necessary technologies to do so. Therefore, if a company cannot - or will not - release the money, the only way for an individual to move their savings is to pay an ‘exit charge´.

With some company policies imposing charges of 4% per year if an account holder chooses to leave early, this could potentially cost some customers one fifth (20%) of their investment.

Financial advisers are anticipating a backlash come April, when policy holders find that they cannot access their money, the article notes. Legal & General, a pension provider with over seven million customers, suggests that some policy holders may have to switch to modern contracts to enjoy the benefits of the amendments - but that this process could incur exit charges.

Although a source associated with the Government has stated that this will not affect the majority or retirees, there are “a small number of schemes” that may have to charge savers for this service. Customers are being advised to check the rules of their particular pension scheme.

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