Pension freedom drives surge of interest

Pension providers have reported a surge in inquiries from customers looking to take advantage of new freedoms to cash in their funds.

After an unusually sunny Bank Holiday weekend saw the first day of the pensions shake-up get off to a muted start, insurers reported mounting interest on Tuesday.

"We have received a substantially higher volume of calls this morning, with a large proportion being advisers calling on behalf of their clients," said Royal London, the UK's largest mutual pension provider.

"Unsurprisingly, most at present are cases where the pension saver is looking to take the fund in cash."

Scottish Widows, part of the taxpayer-backed Lloyds Banking Group, said call volumes were running at three times normal levels on Tuesday. "We expect the trend to continue this week," it said.

The company, which had taken on 400 extra staff to prepare for an anticipated surge in "pension freedom" queries, said the Easter weekend "was slightly quieter than we had expected, probably because people were enjoying the good weather".

"On Monday, we had in the region of 440 calls from customers and those were a mix of full and partial encashment and requests to set up flexible drawdown," it added.

Prudential said on Tuesday that its call volumes were double the level it would normally expect after a Bank Holiday weekend.

"Many customers were asking about cash lump sums," confirmed Prudential.

Aviva said: "Customer call volume levels have increased today. Retirement-related calls into our contact centres are a mix of routine information-gathering as well as some requests for part or full cash."

Fidelity had opened its call centre over the weekend in anticipation of queries from customers keen to take advantage of the reforms, which will give an estimated 2m savers aged 55 and over new flexibility to cash in defined contribution savings.

But while the call centre was quiet on Monday, the situation had changed 24 hours later, with call volumes doubling.

"We've taken just under 150 calls this morning from people coming through our defined contribution business, which is on a par to what we took over the Bank Holiday weekend," said Fidelity.

"While this does not indicate an insane rush, it is definitely higher than normal. We would normally expect around 75-80 calls during a full working day.

"We are also seeing that people generally want to do what they were doing last week in terms of cashing out."

But Fidelity added that many of its customers were not aware of the tax consequences of taking their pension in one go, with anything taken, after the standard tax-free portion, taxable at the individual's marginal rate.

There was also confusion about who was eligible for the freedoms, said Fidelity.

"Since the new freedoms were announced, we've received a steady number of calls from people under the age of 55 who think they can access their funds under the new rules," said Fidelity.

"Obviously, as these reforms bed in, we would expect less of this."

Liverpool Victoria said many of the inquiries it had received on Tuesday about the pensions freedoms were from customers looking for information "rather than looking to make an immediate decision".

Government ministers have previously urged savers to take their time to fully consider their new retirement options, with April 6 not being a deadline to act. Under the changes, savers will still have the option to buy an annuity, go into pension drawdown, or do nothing.

As part of the reform package, the government is also offering a free 45 minute guidance session for those taking advantage of the new freedoms, either face-to-face or via the telephone.

The Treasury said that its "Pension Wise" service could provide 10,000 guidance appointments a week in April, and more than 400,000 appointments a year.

About 1,400 people had booked telephone guidance appointments with the Pensions Advisory Service with 400 face-to-face sessions booked with the Citizens Advice Bureau.

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation