Phoenix Life has announced it is removing exit charges on its unit-linked pension policies, but not all customers will benefit.
The closed book provider said in its interim results published today (23 August) it will remove exit charges for policies valued at less than £5,000 and introduce a charge cap for ongoing charges on unit-linked policies in
In particular, Phoenix will introduce a 1.5 per cent charge cap for policies with a value of more than £5,000, and a 3 per cent cap on policies valued at less than £5,000.
The provider said the move will benefit 250,000 non-workplace pension customers at a one-off cost to Phoenix of £68m.
Phoenix's initiative follows the 1 per cent cap introduced last year for existing workplace pension customers over the age of 55, as part of a government initiative to help people make use of the pension freedoms, which cost the business £25m.
However, the £5,000 restriction on the removal of exit charges means clients with a non-workplace pension worth more than £5,000 could still face a charge from the pension provider when they try to switch their funds.
Alistair Cunningham, chartered financial planner at Wingate Financial Planning, said on the one hand this was a positive initiative, since "these pots can be left stranded by exit charges".
But on the other, "the intimation [is] that 20 per cent of policies [could] still have exit charges. If they do, I find that extraordinary."
A spokesperson at Phoenix Life said even before the scrapping of its exit fees today, 80 per cent of the provider’s customers had faced "no exit charge at all".
But it does not have a calculation for the percentage of clients who will still face an exit charge among the remaining 20 per cent.
The pension provider has been accused of charging high exit fees to its customers, featuring as the provider with the highest charge in PensionBee Robin Hood Index, published earlier this month.
The spokesperson said: "Generally, we keep all of our products, including charges, under review through our product governance processes. Our recent focus has been on ongoing charges as we believe these are more important for customers.
"We are delighted to be able to introduce these caps, and also allow those in smaller pots to exit as we recognise these customers may wish to consolidate these smaller pots.
"We have said before that we do not believe that exit charges are a barrier to exit for customers with larger pots, and we saw little change in the number of exits when we introduced an exit charge cap for customers exiting post age 55."
Phoenix said exit charges were a way of recouping the initial costs incurred.
It said different product designs recovered costs in different ways, including some through reduced allocations to units for an initial period, some through allocating units during an initial period that incur higher ongoing charges ("capital" units) and a charge on early termination, and others that have lower ongoing charges with a higher charge on early termination.