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Phoenix hits back at ‘simplistic’ exit fees criticism

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.”



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There are 10 comments at the moment, we would love to hear your opinion too.

  1. Perhaps oddly enough, I side with Phoenix Life here; why would you pay a ‘96% exit fee’ anyway? Why not just switch funds or wait until SRA (or age 55+)? It’s not beyond the wit of man to be patient sometimes!

    Sure there are times when switching PPP providers makes a good deal of sense, but one has to take into account ‘MVA-free’ periods and, especially on older contracts, loyalty bonus mechanisms. I have some old Sun Life PPP’s ‘on the books’ from the early 1990s and these, capital units and all, have very attractive loyalty bonuses – remember ‘EFI’ anyone?

  2. Simple?? There shouldn’t be exit fees at all – period.

    Phoenix have a reputation as the biggest rip off merchants in the business. The only reason I can’t imagine why they have never been really brought to book by the regulator. They and Resolution Group certainly do their part in bringing financial services into disrepute.

  3. Roddi Vaughan-Thomas 21st August 2018 at 4:06 pm

    MVRs? Crikey I thought they had died….

  4. I’m no fan of Phoenix or Resolution Group but having worked on the exit charge cap for another company who also has MVRs on WP-Fs, they are complying with the regulations. The difficulty with not applying an MVR is the impact on the remaining policyholders whose funds would effectively be reduced.

  5. It’s a bit embarrassing that pensionbee are shouting about something they clearly don’t understand. It’d be great to have with profits plans without MVRs, but that would be unfair to existing policyholders who would see their values reduced because someone wants to transfer. I’d suggest Romi Savova needs to study how with profits funds work before making himself look a touch silly. It emphasises why people need to take financial advice rather than doing an execution only transfer at their detriment.

  6. Is it not the case that an MVR is an adjustment which reflects the difference between the underlying growth achieved and the bonus growth added (I am sure I may be corrected but that is how I understood it to be)?

    If the above IS the case, why has underlying growth not outstripped the pathetic bonus levels applied over the last decade?

    In my personal opinion, what it really is, is a manipulated charge which leverages the exit penalty over and above the cap which the FCA have stipulated should apply

  7. Ban MVRs and have another Equitable Life on your hands. This time not as the result of massive arrogance and a sense of righteousness from an insurance company. No instead this time from a sense of righteousness from commentators.

    Of course in this case commentators are unlikely to get this bandwagon going all on their own.

    Because the With Profits funds are likely ring fenced from Phoenix’s corporate assets it probably won’t have an obligation to ‘dip’ into corporate reserves, not that they would be anywhere near enough to do the job.

    So – stand on principles, sure – but we’re all going to have to dig in again to pay out if those principles win the day.

    Phoenix may be the biggest, but they are not the only.

    I am massively in favour of transparency, honesty, fairness.

    Part of that is having enough awareness of how systems actually work to know what the consequences of actions will be.

    Sometimes it genuinely is the right thing to change the rules for the future (they have been), and then allow the old systems to run through to the end – correcting specific injustices as we go (the systems to do so exist). Then there may be a point where the old system is small enough to be wound up and tidied up. But I don’t think we’re there yet.

  8. Having read the PensionBee “report” I was astonished at how misleading and inaccurate it was. If one of my staff had published something like that, I’d have banned them from the internet. The report mentions “exit fees” but doesn’t bother to say what size of fund they’re deducted from. The article was shockingly poor.

  9. I think Pension Bee need to educate themselves on MVR’s.

    However that said, Phoenix and resolution are absolute wotsits for applying exit fee’s to non with profits funds.

    I complained about my both my own pension that started with General portfolio (back in a time when I didn’t even know what a pension was).

    I also complained on behalf of a client. In both cases the exit fee was basically calculated as the fee that they would collect on managing the money between the point you transferred and your selected NRA.

    So in effect they were charging for the work that they now weren’t going to have to do.

    Their only defence was that it was “in the contract”. even when I observed that terms and conditions that aren’t individually negotiated and that are unfair are illegal under various laws, they refused to budge and the FOS refused to budge in my case.

    However I did laugh on behalf on our client, as the FOS decided to look at the fact that he shouldn’t have been sold the FSAVC in the first place, as he had access to added years AVC’s.

    Had the provider paid out on the complaint and simply waived the extortionate £35k exit fee they were trying to charge, they would have avoided the £95k mis selling compensation they ended up having to pay out 🙂

    However the regulator and FOS were utterly uninterested is these blatantly unfair T&C’s being applied.

  10. However, an Exit Fee reduces the policy value.

    An MVR also reduces the policy value.

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