Standard Life has introduced a 5 per cent cap on exit penalties for thousands of individual and workplace pension customers, Money Marketing can reveal.
The insurer made the change in January ahead of Chancellor George Osborne announcing the FCA’s new duty to impose a cap on “excessive” exit fees.
In addition, Money Marketing can also reveal Prudential will be announcing a cap at “less than 5 per cent” in conjunction with its Independent Governance Committee’s maiden annual report, due in April.
Aegon is also removing exit penalties from workplace schemes as employers hit staging dates.
Standard Life says around 154,000 customers – representing 7 per cent of members – have policies that impose a charge if the term is cut short. It says the average charge is less than 1 per cent of the fund value.
Head of pensions strategy Jamie Jenkins says: “With the introduction of pension freedoms, we initiated a review of exit charges for those over the age of 55.
“On 13 January, prior to the Government’s announcement that it would seek to impose a cap, we implemented a change to ensure that exit charges wouldn’t exceed 5 per cent of any member’s fund value, for anyone seeking to exercise the pension freedoms after the age of 55. This also includes those releasing money earlier in the event of serious ill-health or where they have a protected retirement age.
“Traditionally, most of these customers would have remained invested until their retirement date and many of them will have benefited from a lower annual management charge. This change will help them if they want to access their money earlier under the new pension freedoms.
“We will of course now await the outcome of the FCA’s consultation and make further changes to this, if necessary.”
The provider says “thousands” will benefit from the move, but would not give a specific figure.
Unlike Scottish Widows’ move earlier today, Standard Life’s cap will apply to all pension customers, not just those in workplace schemes.
Widows’ decision to scrap charges for 3,000 people will apply to 98 per cent of the corporate pensions book by 2016, with the remaining cases completed by the middle of 2017.
An Aegon spokesman says: “A minority of our older pension policies have exit charges. We’ve reviewed these and do not consider any to be excessive.
“In response to DWP and FCA rules, all of our workplace pension schemes will have compliant charges with no exit charge from firms’ auto-enrolment staging dates.”
A Royal London spokesman says: “Royal London constantly reviews the number of customers impacted by exit fees and has identified that 97 per cent of members who accessed their pension between April 2015 and 31 December 2015 did not incur an exit fee.
“Royal London has a value for money approach to exit fees and will ensure that if a deduction needs to be made it is fair and only the underlying costs are recovered. Royal London does not profit from exit charges.”
Legal & General, Aviva and Phoenix Life could not be reached for comment.