Legal & General and Standard Life have clashed over levying different annual management charges on active and deferred pension scheme members.
Some of the UK’s biggest pension providers, including Aegon, Aviva, Scottish Widows and Standard Life, offer active member discounts which allow pension schemes to operate a two-tier charging structure for active and deferred members.
In February 2010, Royal London said AMDs can see scheme members no longer employed by the sponsor company charged up to three times more than those who are employed.
L&G pensions strategy director Adrian Boulding says: “We feel that the right thing for early leavers to do is to take their pot with them either to their next employer’s scheme or to an aggregator vehicle such as a Sipp.
“We hope to see some DWP intervention to change behaviour so this becomes the norm but people need support and encouragement to make this happen and not to be beaten with a stick via AMDs.”
Standard Life head of pensions policy John Lawson says AMDs are a legitimate way for businesses to reward current employees.
He says: “I am not convinced that AMDs are anti-member, provided that the leaver’s charge is not excessive and is at or below the level of charge they would have to pay to buy a pension themselves on the high street.
“But what AMDs should not do is penalise ex-members in order to give current employees a better deal.”
Last week, The Pensions Regulator said it plans to consider “potential refinements” to the way pension scheme costs and charges are disclosed.
A spokeswoman says: “All active and deferred members within a pension scheme should be treated fairly and equally enabled to achieve a good outcome from their savings.”