Prudential is to scrap all exit penalties for its workplace pension customers and reduce charges by an average of 15 per cent.
The move comes as part of the insurer’s independence governance committee’s first annual statement and follows Money Marketing’s revelation earlier this month that Standard Life and Prudential were planning to cap exit fees.
The changes include increasing the allocation rate to ensure 100 per cent of contributions are invested and removal of initial charges and charges relating to adviser commissions, and will take effect on all unit-linked and with-profits business from October 2016.
Policy fees will also be capped from April 2016.
However, individual personal pension customers will not benefit from the changes.
In addition, Prudential is contacting two groups of customers to give them the option of switching out of products the IGC says are potentially levying too high a charge.
The affected groups are self-invested customers and paid-up members of workplace schemes with less than £10,000 saved. A fixed monthly administration fee is applied to these pots and Prudential is speaking to customers to explain their options.
The IGC adds it will be working on a solution to help people with small pension pots. The Government’s original plan, known as ‘pot follows member’, was shelved last year, as revealed by Money Marketing.
IGC chair Lawrence Churchill says: “On the face of it, the concept of value for money appears straightforward. However, once you seek to set it out in writing and take account of what really matters, it quickly breaks down into a long list of criteria and variables.
“In our view what ultimately matters is the outcome for members, and I am pleased with the positive strides we have been able to make with Prudential, particularly in relation to charges, to ensure that members are getting value for money from their workplace pension savings.
“There is of course still further work to be done. Over the course of the coming year the IGC will look at the service and communications received by members, as well as where and how members’ money is invested to see if there is a requirement for Prudential to provide better value for money.”