Over 55's losing money in pension drawdown deals
Pension firms are ripping off over-55s using the Government’s pension freedoms, the City watchdog has warned, as it threatened to impose a price cap.
A two year investigation by the Financial Conduct Authority found savers accessing their money via the most expensive arrangements were being charged four times as much as those in the lowest cost deals.
In the worst case, someone investing a £100,000 pension pot in a flexible access fund would be left £36,781 poorer after 20 years than they would be on the lower cost deal. Many of the 1.5 million savers who have so far accessed their savings under the flexibilities might not know they have been given a bad deal.
The regulator also hit out at the complexity of products, some of which can contain as many as 44 different types of charges. The FCA will now force pension firms to tell customers – in pounds and pence – how much they will be charged per year for flexible access to an invested pension.
At present they are faced with confusing pricing information, which means it is virtually impossible to compare investment plans across the market.