PensionsMar 1 2016

Scottish Widows scraps workplace pension exit fees

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Scottish Widows scraps workplace pension exit fees

Scottish Widows will remove all exit fees across its workplace pensions ahead of the introduction of a cap.

It will mean customers will be able to switch to another product or provider without incurring a charge.

Scottish Widows is also in the process of reviewing the exit charges on its individual pensions.

HM Treasury announced plans to cap exit fees in January and the FCA is currently consulting on what level a cap should be.

Peter Glancy, head of industry development at Scottish Widows, said: “We believe more can be done to make the pensions market work better for customers and the removal of exit fees is a key milestone in helping to achieve this goal.

“These fees are largely associated with older style products, typically sold before 2001, and reflect expenses already paid by a provider in setting up the policy, which would normally be paid back if the saver stayed in the scheme to their retirement date.

“But with pension freedoms enabling people to access their money earlier than they had originally expected, we believe these fees place an unnecessary barrier on those wishing to take their money or move to a more modern product either with us or another provider.”

We believe these fees place an unnecessary barrier on those wishing to take their money or move to a more modern product either with us or another provider. Peter Glancy

The provider is aiming to implement the changes across 98 per cent of its corporate pension book by 2016 with the remaining, more complex cases becoming exit charge free by the middle of 2017.

The full rollout of the project involves significant alterations to IT systems and will take 18 months to complete.

FCA investigations have shown 670,000 consumer aged 55 plus faced an early exit charge.

Of these, 358,000 faced charges between 0 and 2 per cent; 165,000 faced charges between 2 and 5 per cent; 81,000 faced charges between 5 and 10 per cent; and 66,000 faced charges of more than 10 per cent.

Adviser View

Kevin Morgan, managing director of Hertfordshire-based Consilium Financial Planning, said: “The existence of these exit fees in an era of transparency has been an ongoing issue with all financial advisers.

“The whole world has changed since the Retail Distribution Review and the spirit of that legislation should be embraced by these organisations, so well done to Scottish Widows for taking this stance.”