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 this week, 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, he 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.”