Questions of Cash: June 2015

Posted on August 4, 2015 · Posted in The Independent

Q. I have a pension pot of around £250,000 from my previous employers, which is held with Friends Life. I rang them six weeks ago to ask if I could withdraw the permitted 25 per cent tax free and leave the rest in there. They said yes, that I need a flexi-access drawdown and they would write to me in ten days with information on how to do it. I have just received their letter, which says “we are unfortunately unable to provide a partial withdrawal or flexi-access drawdown at this time. We expect to make some of these services available later in the year.” Yet they have had more than a year to prepare for this. They then say I could find another provider – but that will be a real hassle. CW, London.

A. Friends Life’s spokesman responds: “We apologise to those Friends Life customers who wish to partially withdraw their savings through the new pension freedoms, as we are not offering this service at the moment. We have seen a high number of pension freedom enquiries from Friends Life customers, the vast majority requesting full encashment and this continues to be our focus. We are planning to offer partial withdrawals in due course. This matter affects customers in the pre-merger Friends Life business, and not other Aviva customers.”

Tom McPhail, head of pensions research at advisers and providers Hargreaves Lansdown, told us: “The timing and manner of the Friends Life decision making was unfortunate, I’m sure they didn’t plan for it to happen this way. Given their merger with Aviva, it is also probably only a matter of time before they are eventually able to offer the full range of retirement options. It is symptomatic of the speed with which the pension freedoms were introduced that not all pension providers are currently able to offer all the freedoms. It is also worth noting that some of them will also almost certainly never develop the full range of retirement services which some of their customers may be expecting. There are a few providers, such as Hargreaves Lansdown, Best Invest, Fidelity and AJ Bell, which are able to deal directly with investors and allow them to use drawdown without having to pay for advice first. The critical test for any pension companies not able to accommodate their customers’ wishes is, will they allow then to transfer out to an alternative provider with the minimum of cost and paperwork?”

We checked with Friends Life about its charging policy on transfers. Its spokesman clarified: “Existing exit charges may apply if a customer chooses to surrender their policy before their retirement age as we need to apply these charges consistently and fairly for all customers. Customers who have reached their retirement age will not have any exit charges. For instance, customers who remained invested in with-profits would be detrimentally affected if we were to waive a surrender penalty for a specific group of with-profits policyholders.”

Q. We hired a Hertz car hire for a week in Iceland and purchased CDW [collision damage waiver] insurance cover.  When we returned the car at end of the holiday, Hertz advised there was sandstorm damage to the near side of the car.  The car required new doors and windows and Hertz requested 1,278,696 ISK, about £6000, for repairs. We contested the amount and refused to pay that excessive amount.  We had to catch a flight home within the hour, so under pressure we accepted Hertz’s compromise of enhanced insurance that enabled cover for the full cost of repair, so we only had to pay a policy excess of 242,103 ISK, £1198. We have emailed Hertz UK and Hertz Iceland and complained that we were not advised about taking out any ‘sand and ash protection’ cover when we collected the car and no advice was given on Icelandic sandstorms – let alone what action to take in the event of a sand storm.  Hertz’s office told us that five other families had suffered sandstorm damage that week.  Some were insured and some were not. AC, Cardiff.

A.  Your experience is a very useful warning to others who are hiring a car in Iceland – and other areas subject to sandstorms or volcanic ash.  But we have been unable to resolve your problem.  It is important to thoroughly plan holidays and learn about potential risks – though the Hertz office could have done more to explicitly warn you, judging by what you say.  A spokeswoman for Hertz responds: “Following a thorough investigation, Hertz has contacted [the reader] with a detailed explanation of the case, including all the relevant documentation.  While [the reader and his partner] accepted the Collision Damage Waiver (CDW) and Theft Protection (TP) at the beginning of the rental – which reduce customers’ liability in the event of an accident or theft – they did not accept the special waiver Hertz offers in Iceland to cover damage from sand and ash. On the rental agreement signed by [the reader’s partner] in Keflavik it can be seen that the insurance and coverage declaration has been highlighted by the staff at the start of the rental to show exactly what was declined and accepted. The ‘Special Note’ at the bottom of this document was also highlighted to ensure customers were aware of important rental information, including the fact that a special waiver to reduce excess liability in case of damage caused by ash/sandstorm is needed. As part of Hertz Iceland’s efforts to ensure customers understand the driving risks in the country, all customers are also provided with extra documentation warning them about this issue.  Unfortunately when the vehicle was returned, our branch found that numerous areas had been damaged from sand and ash. In accordance with the agreement signed at the beginning of the hire, customers were liable for the full costs of repairs.  However, as a gesture of goodwill, when the customers returned the vehicle Hertz Iceland agreed to only apply the liability excess on the invoice – considerably smaller than the actual repair cost.”