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Advisers slam Now: Pensions over £500 employer exit fee

Automatic enrolment provider Now: Pensions has come under fire for hitting employers with an exit fee if they choose to switch to a different scheme within two years.

Under scheme rules in place since it launched in 2012, employers who decide to switch provider within the first 24 months have to pay a fine depending on their size.

A spokeswoman would not reveal how break fees are calculated but said they are “typically around £500”.

She says: “It is designed to recover set-up costs if the contract is terminated within two years.

“The level of the fee is proportionate to the size of the employer, with small employers paying less than large employers, due to the differing levels of work involved. It is clearly explained and entirely transparent.”

Rival mastertrust The People’s Pension and Government-backed Nest confirmed they do not impose exit fees on employers.

Pension PlayPen founder Henry Tapper says he was unaware of the fee and that it would have a “material impact” on the provider ratings his firm maintains.

He says: “£500 is nothing at all for those employers who have staged up until now, but it is a very high price to pay for a false start for SMEs and micro companies.”

He adds: “It would impact upon our employer support rating, it’s an important thing to know about.”

Rowley Turton director Scott Gallacher says: “Now: Pensions seems to be shooting itself in the foot repeatedly. 

“There’s a capacity issue so it’s a shame and if they have to have it they need to be upfront about it. If this fee is buried in the terms and conditions that’s hardly transparent.”

Last year, Money Marketing revealed how 200,000 savers were hit with a Christmas “blackout” as a result of Now: Pensions switching admin providers.

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Comments

There are 8 comments at the moment, we would love to hear your opinion too.

  1. Maybe they should change their name from NOW to THEN

  2. Sounds a bit like to the old capital units from 80’s and 90’s pensions.

  3. Slam! Slam!!!

  4. never understand issues like this…. if I cancel my mortgage early I get hammered…..if I exit my mobile phone contract early I get hammered…I charge clients who exit life assurance contracts in the indemnity period claw back fees .With all the regulations,rules,compliance issues,let alone oodles of bureaucratic administration to go through and then we are made to feel guilty every time we incur costs and expected to take the hit on the chin every time llike a charity…
    Why???…..

  5. If you had done correct research and due dilligence then you would have been well aware of the early exit charge. I used Now last year for a scheme and was aware of this charge and advised my client that it existed, it was in my recommendation report to him.

    What do you want for 0.30%pa charge?

    If I were you, I’d shut up and stop embarrassing yourself!

  6. Why is there this idea that pensions should be cheap/free?

    They have obviously learned from the burnt fingers suffered by Life Offices when stakeholder pensions were launched.

    Lets assume the average salary is £25,000 p.a. and contributions of 6% are being made; NOW would be receiving a whopping £22.50 a year for each member so I hardly think that charging an exit fee in the early years is something they should be castigate for.

  7. It’s in the T&Cs but naturally easy to miss if you’re not bothering to read them. It is crazy to think that some professional advisers believe that all the administrative set up work is pro bono

  8. A long term investment product with considerable set up costs has an exit cost in the first 2 years – why is this newsworthy ? Add to that the fact it’s a pension and delivers auto enrolment – a new product which the government still havent finished tampering with. Its a wonder any pension provider can make a profit with the seeming addiction to bringing in new pension legislation, changing existing rules and adding new ones. I doubt anything major is about to change with whomever takes the chair in the next election so I’d expect to see more of these, put in place to protect the profitabilty of the providers and members trying to get a good return on their pension investment.

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