Phoenix Life has hit back at research from pension consolidator PensionBee claiming the provider is enforcing the biggest exit fees in the market.
At the end of July PensionBee published its third annual survey of Britain’s 35 biggest pension providers based on customer data from those who have transferred to PensionBee.
Part of the survey examined exit fees across 5,431 pensions and found 305 had exit fees in that sample.
Phoenix Life accounted for the five biggest exit fees, according to the survey, with the largest one being £12,245, while it also had the highest exit fees on with-profit pensions.
PensionBee claimed one exit fee would have accounted for 96 per cent of a saver’s pension.
However in an interview with Money Marketing, Phoenix Life chief executive Andy Moss says that the charges have been assessed in a “simplistic” manner.
He argues it is important to distinguish between fees in a simple tracker fund that charges 0.75 per cent and a with-profits fund which may offer guaranteed benefits to the customer.
Moss adds with-profits may also have a greater menu of funds compared to a tracker fund, as well as paying out potential bonuses.
He also disagrees with the PensionBee research which characterises with-profit funds that have market value reductions as having exit fees.
Some with-profit funds have market value reductions in place to ensure all policyholders receive a fair share of the fund when they leave and those that remain in the fund are not disadvantaged.
This may apply where the guaranteed value exceeds the policyholder’s fair share of the fund and this can happen either because market values have fallen or guaranteed values have increased.
Moss says market value reductions in some with-profit funds are not the same as exit charges in simpler tracker funds.
But PensionBee chief executive Romi Savova disputes this and argues market value reductions are effectively exit charges.
She says: “If a fund value is £100 and the transfer value is £60 then the exit fee is 40 per cent. A cap on exit fees has been introduced across the industry and it is wrong a few providers are able to charges these fees to the detriment of the consumer in legacy products. These high charges prevent some consumers from transferring away from old policies.”
Savova notes the FCA does not consider market value reductions as exit fees but argues this should change.
In March 2017 the FCA’s 1 per cent charge cap on early exit fees for the value of benefits being taken or transferred from existing contract-based personal pensions, including workplace personal pensions came into effect.
Savova adds: “The FCA has been collecting data from non-workplace pension providers as part of its work in the area and we [PensionBee] have made our submission to it. We have recommended the FCA extend an exit fee cap to include market value reductions and also apply the cap to those under the age of 55.”