View more on these topics

Independent audit of legacy pension charges to include exit fees

An independent audit of charges in legacy defined contribution schemes will include a review of exit fees on old-style policies.

An update published today from the independent project board tasked with reviewing legacy fees says it will focus on current and forward-looking charges, not historical charges already paid by members.

It also says the review will take into account all member-borne charges, including exit fees.

Member-borne charges identified include fund based charges such as AMCs; initial charges; ongoing fixed charges; early exit penalties; and other “event driven” charges.

The independent board says it is gathering data from schemes and will measure charges on a reduction in yield basis.

It has also set out 37 different hypothetical member-scenarios for which it is demanding data. It says this will allow it to factor individual circumstances into its findings.

The board says it is currently collecting data from providers and will analyse the findings before publishing its report in December.

The legacy review was launched after a report from the Office of Fair Trading warned workplace schemes may be failing to deliver value for money. 


News and expert analysis straight to your inbox

Sign up


There are 2 comments at the moment, we would love to hear your opinion too.

  1. As even the FCA have said reduction in yield was used as a comparison aid for those thinking about transferring. It is not a legitimate way to assess costs and charges and it’s not done in any other industry.

    Take someone earning £30,000 paying tax and NI of £6645, over the next 30 years assuming they lost out on 5% growth means the tax would have cost £30,156. Obviously the person on a salary of £30,000 didn’t pay £30,156 in tax and NI but if it’s shown in that way then the conclusion is that it is bad value.

    Those who lobby should make the point that reduction in yield was not meant for this purpose and all it will do is put people off saving. It will be a pointless but damaging report because of the ficticious way it will measure charges. If I bought a TV for £500 and it cost the shop £250, it doesn’t get described to me as a TV that cost £1080 because of the loss of investment over say 30 years.

  2. Exit charges are the crunch point. Were policyholders able to transfer their funds elsewhere without being hammered, all other considerations would become subsidiary. This investigation needs to focus on just what terms are set out in the policy documents which, I suspect, probably allow the providers to impose whatever terms they fancy on the day and of which they take maximum advantage to invalidate the viability of switching out.

    But, if the report concludes that all exit charges should be waived (or dramatically restricted), the providers might well cry foul and resort to legal proceedings to defend their positions, on the grounds that the imposition of such terms would very probably trigger a cripplingly vast exodus of funds. It’s a tricky nettle to grasp.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm