Phoenix confirms 70,000 hit by high exit fees

 Phoenix confirms 70,000 hit by high exit fees

Closed book life company Phoenix Life has said its business model does not depend on high exit fees, after the Financial Conduct Authority announced it would cap all exit fees at 1 per cent.

As a closed book company, Phoenix holds many older pension policies designed to rely on members holding the policy until a maturity date.

Those that opt to withdraw their funds before the maturity date - often much later than the the age when pension freedoms kick in at 55 - must pay an often-hefty exit fee.

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Yesterday, the FCA announced it would bring in a 1 per cent cap on such charges from 31 March next year. 

Phoenix confirmed that around 70,000 policyholders over the age of 55 were in policies with an exit charge above 1 per cent.

However, it said it did not expect policyholder behaviour to change.

“We do not believe that exit charges are impacting the retirement decisions our customers are making," a spokesperson for Phoenix told FTAdviser. 

"Very few of our pension customers taking their benefits before their selected retirement date have an exit charge payable that exceeds the 1 per cent cap. “

The spokesperson went on: "Some 90% of our pensions customers over the age of 55 will not be affected by the exit charge cap at all. The Phoenix business model does not depend on exit charges.”

Phoenix followed other major life companies in playing down the effects of the exit fee cap.

A spokeswoman for Zurich said: “Zurich has around 250,000 customers aged over 55 with pre-retirement pension plans.

“Of those customers, around 12 per cent (around 30,000 customers) would currently incur an exit charge above 1 per cent.

“Where they do apply, most are 2 per cent or less and would have been put in place many years ago.”

Meanwhile a spokesman for Aegon UK said the company is already moving customers away from “older-style policies” into modern pensions without exit charges.

He said a “small minority” of its customers have an exit charge and would benefit from the cap.

Scottish Widows has said it intends to remove all exit charges across individual and workplace pensions by the 31 March 2017.

A spokeswoman for Aviva said: “The vast majority of Aviva’s pensions do not carry early termination charges. We are working towards the proposed 1 per cent cap on contract-based pensions.