Frustration is growing among self-invested pension providers over tactics used by rival firms to block outgoing transfers by hiking fees to a level that many clients would find prohibitive.
Dentons Pensions’ director of technical services Martin Tilley told FTAdviser the firm has seen evidence of clients being faced with fees of £800 per asset for in-specie transfers by regulated Sipp providers to transfer to a regulated rival.
Mr Tilley said the charges, which are invariably substantially higher than those charged for the more complex undertaking of transferring assets in, would almost certainly constitute a breach of the Financial Conduct Authority’s Treating Customers Fairly consumer outcomes.
TCF outcome six states that customers should not “face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint”.
Mr Tilley said Dentons saw 25 per cent growth in new Sipps business through the final three months of 2013, of which 50 per cent had come from other providers, up from a transfer proportion of 33 per cent for the final quarter of 2012.
However, he said the firm believes there is more transfer business in the market that is being prevented as a result of the fees being imposed by rival providers, which in many cases are at such a level that the customer or adviser decides they are best served staying where they are.
Mr Tilley said: “Costs are lower to bring assets on than to move them off - that cannot be right can it? It frustrates the hell out of us because we believe we’d be a beneficiary [of this prospective transfer business].”
Last week Greg Kingston, head of marketing and proposition for Sipp provider Suffolk Life, said he too had seen evidence of providers introducing high transfer fees, as well as other charges including for asset disposal fees, valuation and conveyancing, which pushed exit costs “into thousands of pounds”.
Mr Kingston, who similarly cited potential breaches of FCA TCF principles, said the trend was especially prevalent with commercial property schemes.
He told FTAdviser sister title Financial Adviser: “In general, it should be no more costly to transfer out of a Sipp than to set one up.
“However, I suspect that complaint levels are currently low, with many investors resigned to staying with their current provider when faced with, ‘it’s in our terms and conditions’.”
Ray Chinn, head of pensions and investments for LV=, told the paper he did not believe providers are “deliberately seeking to stop people transferring out” and that most “would say that the charges are in their fee schedule”.
He added: “The problem is that the customer is often not aware of the costs until the transfer takes place.”
