Hargreaves Lansdown’s clients face an exit fee of £295 plus VAT if they open a an account post-April and then withdraw all their funds within the first 12 months under the new pension freedoms.
Following the announcement of its new charging structure for non-advised drawdown this morning, Tom McPhail, head of pensions at Hargreaves, confirmed to FTAdviser the charge would apply to new Vantage Sipp customers taking their money within one year.
“If someone opens an account with us, goes into drawdown and then closes it again by taking all their funds out, we have made provision to apply the additional account closure charge. It won’t apply to existing Vantage customers or to investors who want to use our drawdown services on an ongoing basis.”
He explained that the account closure charge is only there to cover off situations where someone wants all their money back in one go, using administration services to achieve that.
Mr Mcphail added: “In such situations it is likely to make more sense for them to cash their entire pot in from within their existing provider’s arrangement.”
Hargreaves is one of a handful of providers who have released pricing information regarding their post-April retirement proposition.
FTAdviser reported yesterday (17 February) that with less than seven weeks to go - and while firms have been busy promoting what the proposition will entail - most have been more shy detailing their pricing, especially around lump sum and full withdrawal access.
From 6 April, the four core options set out by the government to take income include an annuity, taking the whole pot as a cash lump sum, ad hoc lump sums without crystallising the pot, or new flexi-access drawdown.
Individual payments taken through the uncrystallised fund pension lump sum option will pose an interesting challenge for providers, who stand to lose substantial revenue in assets under management-based charges if clients withdraw huge sums.
As highlighted by Hargreaves, providers are also in a bind as to what to charge clients who plan to open an account to withdraw their entire pot. Several providers are not only reviewing this charge, but are still reviewing all charges.
Graeme Mitchell, managing director of Galashiels-based Lowland Financial, previously said while it is understandable that providers are struggling with changes announced less than a year ago, it is making his job harder.
“Not surprisingly, some are not publishing them [charges] yet, as they are now playing a game of Russian roulette and they don’t want to be the first one.
“At the end of the day just say the price: ‘this is the charge’. We are trying to get strategic and tactical plans in place but it is hard to do this when it’s unclear which providers we will use.”
donia.o’loughlin@ft.com
