Questions of Cash: No such thing as pension freedom; hiring a car in Iceland comes with a weather warning

One reader was told by his pension provider that they were unable to provide a partial withdrawal or flexi-access drawdown

Insurance black spot: a car drives under a volcanic ash cloud in Iceland (AFP/Getty Images)

Q. I have a pension pot of around £250,000 from my previous employers, which is held with Friends Life. I rang the insurer six weeks ago to ask if I could withdraw the permitted 25 per cent tax-free and leave the rest in there. It said yes and that I needed a flexi-access drawdown and it would write to me in 10 days with information on how to do it.

I have just received Friends Life's 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."

It then said I could find another provider – but that would be a real hassle. CW, London

A. Friends Life's spokesman responded: "We apologise to those 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 inquiries 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 the adviser Hargreaves Lansdown, said: "The timing and manner of the Friends Life decision making was unfortunate, I'm sure it didn't plan for it to happen this way ... It is symptomatic of the speed with which the pension freedoms were introduced that not all providers are currently able to offer all the freedoms."

He added: "There are a few providers – such as Hargreaves Lansdown, Bestinvest, 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 company 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. Those who have reached their retirement age will not have any exit charges."

Q. We hired a Hertz hire car 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 that there was sandstorm damage to the near side of the car. It required new doors and windows and Hertz requested around £6,000 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 meant we only had to pay a policy excess of £1,198.

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, let alone what action to take in the event of a sandstorm.

Hertz's office told us that five other families had suffered similar damage that week. Some were insured and some were not. AC, Cardiff

A. Your experience is a very useful warning to others hiring a car in Iceland – and other areas subject to sandstorms or volcanic ash. But we have been unable to resolve your problem.

A spokeswoman for the company said: "Following a thorough investigation, Hertz has contacted [the reader] with an explanation of the case, including all the relevant documentation. While [the reader and his partner] accepted the collision damage waiver and theft protection [TP] – which reduce customers' liability in the event of an accident or theft – at the beginning of the rental, they did not accept the special waiver that 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, they 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 by sand and ash. In accordance with the agreement signed at the beginning of the hire, customers were liable for the full costs of repairs.

"But 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."

Questions of Cash cannot give individual advice. But we'll do our best to help if you have a financial dilemma. Email us at: questionsofcash@independent.co.uk