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PIA paid-up pension move may cost millions

Life offices face losing millions of pounds as the PIA forces them to slash charges to fit new paid up pension guidelines.

The regulator will now require life offices to cut charges to ensure those with paid up personal pensions are not penalised because they have not transferred to a stakeholder plan.

It has just endorsed ABI guidelines, which recommended that those taking a Pup should not be disadvantaged. The move follows months of confusion over the status of the ABI guidance.

Axa Sun Life which has championed fairer Pups values for those transferring into stakeholder says rival offices including Clerical Medical, Standard Life, Norwich Union will face a bill running into millions.

Experts say life offices will be forced to lower Pup charges under the new regime.

Axa Sun Life marketing manager Steve Muir says: &#34Companies offering Pups and transfers as options may have to drop charges if savers are not to suffer material disadvantage. The cost will certainly run into the millions.&#34

Scottish Life marketing consultant Alasdair Buchanan believes the final bill will be at least £30m.

PIA head of press Sarah Modlock says: &#34If you have really good Pups at the moment then it won&#39t cost you anything but if they are useless then it will cost you something.&#34

Norwich Union pensions marketing manager Iain Oliver says: &#34We are pretty good on Pups – not the lowest or highest. We don&#39t think it will cost us, but it depends on the definition of material disadvantage.&#34

Norwich Union levies a 0.875 per cent annual management fee on Pups.

Standard charges 0.625 per cent a year plus a £2.95 monthly fee and says it fits within the PIA regulatory update 64 guidelines on pension selling.

Clerical Medical levies a 0.3 per cent monthly charge, typically only for five years, and a £1.75 month fee and says its Pups will not materially disadvantage clients.


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