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Labour warns over charges following pension reforms | Labour warns over charges following pension reforms |
(about 17 hours later) | |
Labour is urging the government to ensure people taking advantage of new pension freedoms next April are not ripped off by financial firms. | Labour is urging the government to ensure people taking advantage of new pension freedoms next April are not ripped off by financial firms. |
Many over-55s will be able to dip into their pensions pots when they wish to. | Many over-55s will be able to dip into their pensions pots when they wish to. |
But the party says a charges cap may be required to prevent investors in certain schemes losing more than a quarter of their money in fees. | But the party says a charges cap may be required to prevent investors in certain schemes losing more than a quarter of their money in fees. |
The Treasury says savers will be given impartial guidance and new rules for financial firms are being introduced. | The Treasury says savers will be given impartial guidance and new rules for financial firms are being introduced. |
Up until now most people in defined contribution schemes - where the final pension depends on the amount of investment returns - bought an annuity, a pre-set income for life, from a provider when they retired. | Up until now most people in defined contribution schemes - where the final pension depends on the amount of investment returns - bought an annuity, a pre-set income for life, from a provider when they retired. |
From next April, savers will be able to use their pension money as they see fit, from the age of 55. | From next April, savers will be able to use their pension money as they see fit, from the age of 55. |
More than 300,000 people will be able to access their pensions. A quarter of the money withdrawn will be tax-free, with income tax payable on additional withdrawals. | More than 300,000 people will be able to access their pensions. A quarter of the money withdrawn will be tax-free, with income tax payable on additional withdrawals. |
Labours says it is concerned that insurers, investment managers and advisers will see the change as an opportunity to cash in. | Labours says it is concerned that insurers, investment managers and advisers will see the change as an opportunity to cash in. |
'Not thought through' | 'Not thought through' |
In particular, it is highlighting the potential high fees for pensioners who use so-called income drawdown schemes to access their cash, a practice up until till now used mostly by wealthier retirees. | In particular, it is highlighting the potential high fees for pensioners who use so-called income drawdown schemes to access their cash, a practice up until till now used mostly by wealthier retirees. |
The schemes allow savers to take part of their pension while keeping the rest invested in the stock market. | The schemes allow savers to take part of their pension while keeping the rest invested in the stock market. |
Labour says the fees for such schemes could reach 27% of the value of a £30,000 pension pot, if existing charging structures on drawdown products were applied. | Labour says the fees for such schemes could reach 27% of the value of a £30,000 pension pot, if existing charging structures on drawdown products were applied. |
Pensions minister Steve Webb said the Financial Conduct Authority would soon be publishing new guidelines for companies selling pension-related financial products. | |
But Labour says the government has not included income drawdown investments in its plans to combat high fees. | But Labour says the government has not included income drawdown investments in its plans to combat high fees. |
Shadow pensions minister Gregg McClymont said: "Labour welcomed the new pension flexibilities announced in the Budget, but we are concerned that the government has not thought through the risks of rip-off charges." | Shadow pensions minister Gregg McClymont said: "Labour welcomed the new pension flexibilities announced in the Budget, but we are concerned that the government has not thought through the risks of rip-off charges." |
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