Pension Penalty charges

At Enable in Bishop’s Stortford our IFA’s know that over 200,000 retirees accessed their pension in the first three months of the new freedoms, and more are doing the same. A good 84% of people who did this experienced no exit charges for moving their money into drawdown and making use of the new pension freedoms. But that means that some 32,000 retirees were hit by penalties, some up to 5% of their pension pot.

The good thing is that these charges relate to older pensions. Laith Khalaf at Hargreaves Lansdown said it is the older contracts from the 1980s and 1990s that are more likely to have exit charges; modern contracts no longer allocate ‘capital units’. He continued: “Capital units’ were extra funds allocated to savers to cover the cost of commission paid out to advisers. Exit charges effectively claw back of these extra units when a pension is transferred. Capital units are no longer allocated as advisers are not allowed to receive commission in this way anymore.” Khalaf also added that even these pensions should be able to be transferred without penalty if they were held to maturity, typically age 60 or 65.  However, those wishing to transfer before the maturity date will have to decide whether the increased flexibility and accessibility of pension cash is worth the fee they will pay.”

Enable’s IFAs in Bishops Stortford can help you look at you existing pensions and help you find ways to provide for your retirement.

Issued by: Enable Independent Financial Life Planners 
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
 Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE