The Government is being urged to put pressure on providers to stop selling financial products with “significant” exit fees attached.
Last year, pensions minister Steve Webb warned insurers their “battered” reputation could be further damaged if they fail to address “unfair” charges on legacy business.
Hargreaves Lansdown says the Government should tackle providers which continue to sell policies with exit fees. Hargreaves charges a flat fee of £75 when an investor leaves its Sipp.
Head of pensions research Tom McPhail says: “We know there are still new policies being sold with significant exit fees attached, although they are the exception rather than the rule.
“I would love to address the problem of exit fees on legacy business but we should not be adding to the problem. The Government and the regulator need to pressure the industry to get its house in order on new business exit fees.”
Syndaxi Chartered Financial Planners managing director Robert Reid says: “The main problem with exit fees is they are not particularly transparent – in the RDR world pricing should be absolutely clear and an exit fee muddies the waters.”
St James’ Place currently sells policies with a 6 per cent exit fee attached at the outset.
Marketing director Tony Dunk says: “Only in the event that a client withdraws their investment within the first six years will we apply a reducing charge which serves to cover our set-up costs and operates on a sliding scale over the first six years, from 6 per cent reducing by 1 per cent per year to nil.”