St James’s Place says the FCA’s proposed 1 per cent cap on pension exit penalties will have “no impact” on its business.
The wealth manager controversially applies an exit fee of 6 per cent for pensions and investment bonds. This declines by one percentage point a year until there is no exit charge over six years.
In 2015 an analyst note warned regulatory change was the biggest threat to SJP’s business. UBS analyst Colm Kelly said: “A ban on the charging of surrender penalties to enable more freedom around switching would have material consequences for SJP’s earnings profile.”
And last week the FCA and Department for Work and Pensions announced plans to cap pension exit penalties at 1 per cent for existing products, with an outright ban for all new contracts. The rules apply to anyone attempting to use the pension freedoms.
However, an SJP spokesman says: “SJP is fully compliant with the rules and this change will have no impact to its business.”
Fairey Associates managing director Ed Fairey says: “SJP is eminently successsful but it charges clients a lot more than the rest of the advice market.
“In this day and age it should be game over for the exit penalty but SJP continues to operate it, while continuing to operate an internal commission market for member firms. Its business model is for yesteryear.”
SJP clients are subject to an initial charge of up to 5 per cent for Isa and unit trust investments. For pensions and investment bonds initial charges range from 2.5 to 4 per cent, then ongoing charges of between 1.5 per cent to 2 per cent.