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Providers to slash exit fees and extend loyalty payments after FCA governance crackdown

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Royal London is extending loyalty bonus structures for thousands of customers with legacy policies while another provider is set to cut exit fees following recommendations by new Independent Governance Committees, Money Marketing can reveal.

PTL director Richard Butcher – who sits on the IGCs of Standard Life, Old Mutual Wealth and a governance advisory arrangement representing several insurers – says one of the providers is moving to limit exit penalties by unilaterally lowering normal retirement ages.

In addition, Scottish Widows has already reconfigured some of its cash funds following IGC concerns that returns were not beating charges.

The watchdogs were imposed on insurers after a damning 2013 Office of Fair Trading report into the defined contribution pensions market. They are tasked with ensuring savers in workplace pension schemes are getting value for money.

The IGCs are due to make their maiden annual statements with recommendations in April. However some providers have already made changes.

Royal London head of corporate affairs Gareth Evans says: “Some products have had a loyalty bonus which is capped at a specific rate over a number of years and ceased after a while, which we have now reinstated.We’ve said that’s not particularly fair so we’ve extended the bonuses beyond the cut-off dates.”

Thousands will benefit from the changes, Royal London says.

Scottish Widows has made changes to cash funds after intervention from its IGC, which is chaired by B&CE chair Babloo Ramamurthy.

Head of industry development Peter Glancy says the insurer took steps last year after the committee warned that in some cases cash funds were returning less than fund charges.

He says: “They challenged the investment team to come up with something better and they produced a new cash instrument with the same risk profile but producing returns at a higher level than the charges.”

He adds: “We will also be writing to customers in older products letting them know new products are available but we won’t be suggesting they move – they need to get guidance and advice first.”

Page Russell director Tim Page says: “I’m heartened to see the IGCs might not be the paper tigers I’d feared they would become.”

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