Do consumers need protection from pension firms?

Why would they stop plundering the pot after initial charges and 30 years of management fees? If people are choosing not to hand over yet more of their money by buying annuities, then setting up complex withdrawal fees is the next best thing.

Those fees have been highlighted several times in the press, but consumer group Which? has now revealed just how greedy some firms are being.

The alleged list of shame is topped by three of the biggest firms: Scottish Widows, Prudential and Aviva. These would respectively take £36,490; £25,310 and £25,310 over 10 years from a £250,000 pot invested in a flexible access drawdown plan where 6 per cent was withdrawn each year and the fund grew by 5 per cent per year, it is claimed.

The most expensive snatches £10,000 more than the cheapest surveyed, which in this case was LV=.

For smaller pension funds Fidelity comes out cheapest.

This variation in fees might be justifiable if consumers understood what they were paying. But fee structures are so complicated that they often do not have a hope.

For example, some companies charge to set up a drawdown plan and some charge an annual drawdown usage fee. Some charge to take ad-hoc amounts whereas Fidelity and Hargreaves Lansdown do not.

Some have five different sorts of fees.

This would be all very well if it were simple and free to move between companies, but exit fees are rife, and some firms appear to be moving at a snail’s pace towards embracing the reforms.

No one is suggesting that this service can be run for nothing. But administration charges should reflect the cost of administration.

No one wants to see more regulation. But unless the industry as a whole adopts a more constructive attitude and treats customers fairly, then more regulation is what it will get.

Unless the pensions industry treats customers fairly, then more regulation is what it will get.

This will be unfortunate for those companies which are behaving positively because they will be paying the price for the greed of their competitors.

But if firms continue to regard their customers’ lifelong pension savings as a cash cow to be milked then price-capping regulation seems to be inevitable.

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What next after Wheatley?

Martin Wheatley’s announced departure from the FCA was met with predictable venom from those who see the world only from their ivory towers in the City.

Wheatley is a figure of hate for some who blame him for failing to correct quickly enough misunderstandings following a briefing given to a Telegraph journalist of a potential investigation into insurance company charging.

Some might suggest the share price plunge said more about overcharging than about Wheatley’s abilities.

The FCA was also missing in action in the run-up to the pension reforms, failing to give guidance when it was desperately needed. And consumers undoubtedly suffered as a result.

Then there was his decision to accept a whopping bonus and pay rise after he had suggested shareholders get tough about bank bonuses.

But against this he has done a decent job of clearing up the mess created by banks and the Financial Services Authority. The big fines for mis-selling and market abuse have been instrumental in focusing minds and increasing consumer protection.

What concerns me is what we will get next. The FCA’s central role is to protect consumers and the financial markets while promoting competition.

It needs at its helm someone who understands consumers and is prepared to fight their corner, not some patsy for the vested interests of the City.

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Box-tickers begone

I sometimes wonder about the sanity of building society and retail banking bosses. A few years ago they were queueing up to lend to those who could not afford to borrow.

Now they are accused of adopting a box-ticking mentality to the detriment of those with a proven borrowing and repayment record.

Fos says that borrowers who had been told their loan was portable and could be moved to a new home are now being blocked because they do not fit new lending restrictions.

These are often good customers, paying their bills without a whimper.

Perhaps these lending bosses should ‘port’ themselves to new jobs they will find less challenging and more in tune with their box-ticking abilities. I think there is such a role open at the entrance of my local dump (sorry – recycling centre).