The Association of British Insurers says it will look into the impact that exit fees are having on old pension plans although pensions minister Steve Webb says it will be difficult to force providers to drop charges unless customers have been misled.
Last week, insurance companies came under attack from Labour leader Ed Miliband, who said he is determined to tackle the “massive, massive issue” of pension charges.
On Friday, Money Marketing revealed details of a Labour pension policy document which sets out the party’s “four-point workplace pensions action plan”. One of the proposals is to ban active member discounts.
The final document, published this week, also warns of the “damaging” impact of exit fees on old pension policies.
ABI director general Otto Thoreson says: “Where exit charges do exist, they are there to protect those who still have money in the fund, or because the contract was set up for a longer period of time but the customer benefited from charges which were lower than the insurers’ costs. We are already discussing this issue with our members to better understand the scale of the issue.”
Speaking to Money Marketing, pensions minister Steve Webb says it would be “very difficult” for the Government to force insurers to drop the charges unless it could prove that consumers were misled.
Hargreaves Lansdown head of pension research Tom McPhail says the ABI should encourage providers to enter an amnesty on exit fees.
He says: “I would like to see life companies ditch those exit penalties because it would make it easier for people to take control of their money.”
Worldwide Financial Planning IFA Nick McBreen says: “I think when you start trying to unravel old contracts you enter very dangerous territory.”