Personal Pension  

Providers defend their U-turn on exit charges

Providers defend their U-turn on exit charges

Providers have defended their stance on scrapping exit charges, following interventions by Independent Governance Committees (IGCs) which left many of them making U-turns on their positions.

IGCs were created in 2013 after a highly critical Office of Fair Trading review into the defined contribution pension market.

The bodies were given new duties to investigate costs and charges from April 2015, and after a series of damning reports, in March a number of providers changed their stance on pension exit charges.

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Exit charges have been scrapped for all new products across a number of pension providers.

Scottish Widows has now removed all exit fees across its workplace pensions. But Pete Glancy, head of industry development defended historic charges, explained older products had more complicated cost structures.

Prudential has reduced charges by an average of 15 per cent across its group personal pensions.

A spokesperson said the charges represented normal market value at the time the policies were taken out, also defending the provider’s change in stance.

Royal London has reduced or removed charges which were not considered fair value on contract by contract basis rather than impose a blanket cap.

Ben Gaukrodger, savings policy manager at the Association of British Insurers, also defended its members.

Providers are committed to delivering value for money for their customers and constantly review their charging structures, including exit fees, he said.

Andrew Pennie, marketing director at Intelligent Pensions said change had not necessarily been easy for companies with older contracts.

“Policy contracts can’t always be easily broken and we shouldn’t forget companies do have a duty of care to their shareholders as well.”

Adviser view:

Robert Lewis, director at Flintshire-based Heritage Financial Solutions said he believed that the removal of “unethical” exit fees was “just the tip of the iceberg”.

“Problems have been with with-profits funds, because they have historically not been transparent - you never really know what you are earning or what the cost of the pension scheme is.”