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Aviva to review exit fees on old pension plans

David Barral Aviva 480 new

Aviva has become the first provider to commit to tackling unfair exit fees on old pension plans following pressure from industry experts and politicians.

Last month, a Labour policy document warned of the “damaging” impact of exit fees.

The Association of British Insurers has committed to uncovering the extent of the problem, with Hargreaves Lansdown head of pensions research Tom McPhail urging providers to enter an “amnesty” on exit penalties.

Pensions minister Steve Webb subsequently warned insurers their “battered” reputation will be further tarnished unless they tackle the issue.

Speaking to Money Marketing, Aviva UK Life chief executive David Barral (pictured) says: “We are going to look at the exit fees we have got in our back book. We do not believe this is a big issue for us but we are going to review it.

“If we find cases where the charge has not been made clear or is unfair to the customer, we will look to put them into the position they should be in.”

However, rival provider Skandia says it has no plans to lower exit fees on old pension policies.

A Skandia spokesman says: “This is not a big issue for Skandia. Approximately 0.5 per cent of our policies are pensions with any kind of exit penalty.

“The terms of these contracts were fully disclosed at the point of sale and designed to exist for the lifetime of the product. We will not be disclosing the value of these policies but it is a very small fraction of our overall book.

“Skandia is not currently considering a review of its old policies.”

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. Skandia won’t do anything as it would seriously adversely affect the offshore book.

  2. This backs up why I will not deal with Skandia. If they thought, just once, about what is in their customers interests rather than their own, I might change my mind. No chance of that happening tho….

  3. All the providers with old and disparate books of pension plans (of which Aviva probably has more than most, having subsumed so many other life ofices over the years) would probably save themselves a ton of money simply by transferring their values (without penalty) into single a new version with:-

    1. a simple and uniform charging structure,

    2. no exit penalties,

    3. fund based trail commission for advisers,

    4. access to their current range of funds and

    5. online access, via a single portal, to valuations, projections and documentation.

    Scrap initial/capital units, scrap allocation rates of less than 100%, scrap flat monthly policy fees, scrap paid-up fees and wipe clean all the old slates in one fell swoop.

    Think of the huge degree to which it would streamline the administration all these messy, uncompetitive old contracts. On some of them, requests as simple as a current valuation can take up to 10 working days to fulfil which, in the current day and age, is positively Dickensian. Where’s the logic in not doing so?

  4. Julian – Standard Life did this years ago for the majority of their pension plans and were not really thanked for it at the time. They really were ahead of the game in many respects.

  5. To Sandy Shore ~ the trouble is (as I should have mentioned in my last post) that transferring into a new plan means loss of the Contributions Insurance element of the old one, which makes it difficult to justify and time consuming to explain to the client. Plus there’s all the paperwork so, to all intents and purposes, you have to sell the whole proposition all over again in return for virtually no remuneration. Clients won’t pay a fee for this type of work, whilst more and more clients have completely lost faith in pensions anyway. There’s no mileage in it.

    If Standard Life were able to convert (unilaterally) all their existing plans to stakeholder terms as of 6.4.2001, thereby rendering them profitless overnight, then why can’t they simply add now the facility for fund-based trail?

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