LV= says it will levy an exit charge on flexible drawdown clients to cover the cost of administering the product but is unlikely to levy an initial charge.
The mutual provider, which has confirmed it will offer flexible drawdown from April 6, says some form of charge is needed to protect the interests of members against customers taking their money out of the scheme shortly after joining.
Head of pensions Ray Chinn says: “The product will be designed to make sure that if somebody does put their money in and then take it out very quickly, our costs are covered. My expectation is that we will err on the exit charge side rather than initial char- ges but it is very much still work in progress.
“The biggest challenge for us is that those kind of charges are not that prevalent in the pension market or the Sipp world. We spent a lot of time moving away from that world so it might seem a bit perverse to bring it back but we have to make sure we cover our costs.”
Hargreaves Lansdown, which has also confirmed it will offer flexible drawdown from April, says it has not reached a decision on charges. Pensions analyst Laith Khalaf says: “We are waiting for news from HMRC on the evidence req- uired for meeting the minimum income requirement.”
Premier Pension Services, a subsidiary of Jardine Lloyd Thompson, says Premier may charge an initial fee and an exit fee to protect against people drawing their entire fund in year one.
Both Premier Pension Services and LV= say the precise level of any fees will be confirmed in the coming weeks.