Pensions  

PensionBee ‘benefit waiver’ causes industry uproar

PensionBee ‘benefit waiver’ causes industry uproar
PensionBee chief executive officer Romi Savova

Industry members have raised concerns after an email from PensionBee to customers outlined it would provide the “option to waive checking for exit fees and valuable benefits” to speed up the consolidation process.

In the letter, shared on Twitter by Capital Asset Management chief executive officer Alan Smith, Pension Bee said: “With some providers, some older pensions may have exit fees or special benefits, such as guaranteed annuity rates and protected tax free cash.

"In general, these occur in less than 2 per cent of pensions and exit fees for over 55s are capped at 1 per cent of the pension value. We give customers the option to waive checking for exit fees and valuable benefits. 

“This means that we won’t check with your provider on either of these things, which can also help to speed things up.”

The uproar on Twitter began shortly after Smith tweeted a snapshot of the letter, with many stating their surprise at PensionBee’s offering.

Smith said: “The waiver form sent to clients is borderline unethical, and certainly poor practice that no regulated adviser could get away with.

“There are some extremely valuable benefits built into some older pension plans and clients will lose them on transferring their funds – they can be quite complex to understand and therefore many people could do it unknowingly.”

He argued that in certain circumstances the costs could run into tens or even hundreds of thousands of pounds.

“In my opinion, PensionBee should refer any complex transfers to independent, regulated advice professionals,” he said.

Likewise, Co Navigate co-owner and financial planner Jamie Bogle, like many, agreed and some raised queries as to how the Financial Conduct Authority did not act on this.

Bogle said: “I find it astonishing that the regulator would allow this. We go to great lengths to ensure a client isn't missing out on valuable guarantees or being penalised for transferring a pension. This information is often hidden away and not easy to spot unless you know what you're looking for. 

“A client might well be comfortable forgoing those guarantees or paying a transfer penalty in the end, but how can you know unless you have an informed conversation with them? To be able to offer speed as a benefit to the client is dangerous and irresponsible.”

'Highly irresponsible'

Meanwhile, Open Money founder Anthony Morrow said pension consolidation has been a significant market for asset accumulators especially in the do-it-yourself space.

“PensionBee is clearly the most successful of the various entrants over recent years but by no means the only one,” he said. “I've long believed that the idea of 'all pots in one place' and a 'shiny app' are not good enough reasons to transfer your pension. 

“In fact it is reminiscent of the problems in defined benefit pension transfers where common reasons were "investment choice" and "flexibility". 

“This swerving of looking at major benefits is shocking.”

Planworks owner Nathan Fryer said it is “highly irresponsible” given that some of these features of older style pensions can be quite significant.