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Govt urges providers to scrap ‘unfair’ old pension charges

Steve Webb 480 LibDems DWP

Pensions minister Steve Webb has warned insurers their “battered” reputation will be further tarnished if they fail to cut fees on old pension plans.

The Association of British Insurers is currently attempting to uncover the extent of the problem of exit fees on historic pension policies.

Last week, Hargreaves Lansdown head of pensions research Tom McPhail urged providers to enter an “amnesty” on exit fees.

Writing in The Daily Telegraph today, Webb says: “I would like to see the leading companies look again at their ‘back book’ of old pension policies.

“They should ask themselves if the battered reputation of their industry would not be greatly enhanced if they were to revisit these schemes and offer scheme members fairer terms.”

However, it is unlikely the Government will be able to force providers to amend the contract terms on old pension products.

In an interview with Money Marketing last week, Webb said: “If people entered a contract 15 years ago on certain terms, unless you can show they were misled it is very difficult for the Government to intervene.

“However, one might have a conversation with the industry and particular providers and ask whether certain exit penalties are something they still want to be associated with.”

AWD Chase de Vere head of communications Patrick Connolly says: “Some of the exit penalties on old policies are scandalous, so if the Government can put pressure on the industry to reduce them that would be a good thing.

“However, these providers have shareholders to satisfy so it is by no means certain that they will enter into a voluntary agreement.”

Webb also used the Telegraph article to renew the threat of capping pension charges – a warning first issued by the pensions minister at an ABI conference in June last year.

However, Webb told Money Marketing the Government does not believe people will be automatically enrolled into poor value pension schemes.

He said: “We do not perceive that lots of people are about to be auto-enrolled into bad value pension schemes, quite the contrary.”

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Comments

There are 9 comments at the moment, we would love to hear your opinion too.

  1. This should push up Resolution Life`s shares.

  2. Well and good but it really needs to be made clear that they are talking about OLD pensions.

    Perhaps they should name some of them:

    Abbey Life
    Windsor Life
    Resolution
    Phoenix

    That would do for a start.

  3. This is a fine, noble and completely unachievable escapade.

    However in the same spirit, restoring the ability to recalim tax on dividends in pension funds and ISAs is both achievable and sensible. It’s not as if the government wasn’t warned back in the 1990’s, not least by the then opposition parties!

  4. You can calculate the cost of Gordons tax raid on pensions, and continued by this government as equivalent to a 0.49% per annum charge on the average pension fund. Pot and Kettle Mr Gove.

  5. If old style Pension fund bid offer spreads are deemed unfair will NEST drop theirs?

  6. Yes some of the charges are scandalous but so was the commision taken the advisers. Are they going to refund that? Off course not because this is the money that built the businesses of the advisers in the first place. Having moved it round a few times of course.

  7. Er, wot about that nasty little 55% tax surprise a widow gets when she wants to take her deceased husband’s fund as a lump sum.

    Let’s read that slowly shall we f-i-f-t-y f-i-v-e p-e-r-c-e-n-t.

    Now that’s what I call treating the public fairly!

    What the life assurance industry takes in charges is as nothing compared to what HM Treasury takes in tax. And, taking account of the fact that a good proportion of the fees taken by life assurance companies ends up in the Treasury as tax to pay generous pensions for the likes of Mr Webb, perhaps Mr Webb would like to offer an apology to the British public now.

    The moment government ministers offer to take pay cuts to reduce their burden on the public purse I will be believe some of the drivel they come out with.

    P-L-O-N-K-E-R-S

    I love you all

    L-A-R-R-Y

  8. Well that will drive up the cost of current pensions.

    The cost of changing the systems on these old contracts will be in the 100s of millions. Not that these people have done badly at all. Their funds would have benefitted from the post war boom, they would have got advice included in the charge at the time. They quite likely may benefit from higher tax free cash limits.

    Thios is a bit like someone (Mr Webb or Mr Milliband) seeing a car on the road built in the 1970’s and saying its not as efficient as todays models. Lets get it updated at the cost of people today to make it into a modern Nissan Primera.

    The simplest option would be to transfer to a new contract but hey there are advice issues not least the TFC one.

    When it comes to exit charges we are talking about With Profits. One message for Mr Webb – Equitable Life! Who do you think you will penalise if you remove these?

    I hear they are culturing human organs in sheep for transplant into humans. The sooner they culture a brain in one of those poor beings the better!

  9. Cont… I mean honestly! The issue with Equitable Life is that they paid out more than the With Profit fund was earning.
    The end of the post war boom saw many life offices re adjust as they too had paid out more on WP policies than could be sustained going forward with lower growth rates.

    If Mr Webb wants those abolished then he will create nil or negative growth WP funds for those who couldn’t afford the RDR advice to get out.

    Yet over the fence are the banks charging 24% (not 0.24% amc) on credit cards. M & S has started charging for current accounts which is fine. Whats not fine is £20pm, on a £1000 current account thats 24%. The average pension charges 0.77% and has far greater regulatory costs.

    This is a rouse to deflect attention from the issue of banks charging too much. 24p in the pound on average as a take to make a profit seems a tad high to me.
    Funny how this 24% keeps cropping up with the banks regardless of interest rates. As Paul Lewis says don’t bother shopping around re interest rate charges. I wonder if he ever put 2 and 2 together and thought surely its not fixed. I frankely doubt it and doubt Mr Webb or the others have.

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