Following the introduction of Pension Freedoms on the 6th April 2015, reports estimate that 60,000 over 55's have already taken advantage of the new rules withdrawing a total of 1 billion1 from their pension pots in advance of retirement.

New research2 released today from money.co.uk, conducted amongst the over 55's who have pensions, reveals that (27%) are planning to- or are in the process of making a withdrawal from their pension before their planned retirement age.

A fifth (21%) of these people are withdrawing this money just to keep on top of their day-to-day living expenses and 13% feel safer holding onto the money themselves rather than leaving it with their pension provider.

Charges for withdrawals

However, further market analysis from money.co.uk3, which focuses on UFPLS withdrawals from 16 of the UK's largest pension providers, reveals that consumers could find themselves faced with further charges if they attempt to access their money.

Overall, our research highlights that the way in which each organisation deals with the new Pension Freedoms initiative is very different. For example some providers levy charges of up to 150 for each UFPLS withdrawal.

Our research shows that more than one in three (37%) of those making or planning to make a pension withdrawal do not know these charges exist. Amongst those surveyed, 31% claim that if they incurred charges it would make them want to move providers.

A further one in five (21%) would make a complaint and 14% would refuse to pay them. Understandably, 54% feel resentful they would have to pay to access their own money.

Provider rules across their product portfolios

Market analysis also reveals that some pension providers have different rules for each of their individual products. This is usually for older products which were not designed with pension reforms in mind.

However, the result is that consumers trying to make a UFPLS withdrawal may have to transfer to a different product or provider in order to access their money in this way. Providers also have varying policies around whether customers can make partial UFPLS withdrawals or only withdraw their entire pension pot in a single lump sum.

money.co.uk's guide to UFPLS pension withdrawals

In order to help consumers navigate their way through this process with their specific provider, money.co.uk has produced a guide3 which explores each provider's policies on:

  1. One-off full UFPLS withdrawals for new and existing customers

  2. Partial UFPLS withdrawals for new and existing customers

  3. Fees and charges for UFPLS pension withdrawals

  4. Advice and guidance required to make a UFPLS withdrawal

The guide focuses primarily on UFPLS withdrawals and currently covers 16 major pension providers, details of which have all been verified by their media teams. The level of detail required to explore every type of withdrawal available is vast and rapidly changing.

Reasons for withdrawals

Alongside the well-publicised reasons for pension withdrawals - such as travelling (16%), paying off the mortgage (15%), helping children (14%), buying a new car (13%) and simply enjoying themselves (8%) - almost one in five (17%) are not planning to spend the money at all. In fact, they just want the security of having a savings pot.

Hannah Maundrell, Editor in Chief of money.co.uk comments:

"Pensions are already a minefield for consumers and much as the new rules offer more flexibility, they also throw up another raft of problems that people need to get their heads around.

"Our report only scratches the surface of the many layers of complication consumers have to wade through in order to make an informed decision.

"Whilst we appreciate pension providers will face administration costs when people draw or transfer their pension, with some offering very limited options for UFPLS withdrawals, it seems unfair that consumers are being penalised for the choice of provider they made many years ago.

"The Government left providers to their own devices when it came to implementing the new rulings - a big ask given the short time frame they had to action what is fundamentally a complete overhaul of the way in which pensions work.

"With life savings at stake, there's certainly a strong argument that a more level playing field needs to be created to ensure consumers get a fair deal. With flexi-annuities entering the equation next April, the need for action is even more pressing."

Notes to Editors:
1. Treasury.
2. Research was carried out with One Poll on behalf of money.co.uk from the 26-29th June 2015 amongst 669 over 55 year olds with a pension.
3. Market analysis was carried out by money.co.uk product analysts and all details were verified by each business between 26th June and 1 July 2015.

About money.co.uk:
money.co.uk, recently ranked second fastest growing business in the Sunday Times Fast Track, was established in 2008 by Chris Morling and remains the only independently owned comparison website within the top players in the UK. The Cirencester based business employs around 40 people and is currently one of the most used financial comparison websites in the UK, attracting around 2.5 million visitors a month. It's a free, online comparison service which allows customers to compare a range of personal finance products and utility services. The website compares over 20,000 products across 56 categories using over 800 comparison tables, offering consumers the best tools and information.