The true cost of the pension transfer crisis is emerging, with life
offices admitting that policyholders could benefit by between £4,000 and
£10,000 from transferring to stakeholder-style policies.
Figures calculated for Money Marketing reveal that thousands of people
with high early transfer value pension plans could be better off if they
transfer to a plan with a 1 per cent charge structure.
This confirms that some of the UK's biggest pension offices, including CGU
Life, Norwich Union, Scottish Amicable, Scottish Equitable, Scottish Mutual
and Standard Life, face losing billions of pounds as customers switch to
che aper plans under IFA advice.
For a 25-year-old paying £200 a month over a 25-year term starting on
February 1, 2000 and transferring on May 1, 2000, the gap between the
existing plan and a stakeholder-style arrangement is £9,08for Norwich
Union, £6,07for Standard Life, £5,992 for Scottish Mutual, £5,749 for CGU,
£5,062 for Scottish Amicable and £4,606 for Scottish Equitable. All these
life offices, except Scottish Mutual, have broadly agreed with the Money
The figures underline the importance for IFAs to revisit pension clients
to ensure they have the best plan or risk losing out to predatorial rivals.
The problem has arisen because, by offering high transfer values in the
early years of the plan, providers risk not being able to recoup their
initial outlay incurred when setting up the plans.
Scottish Amicable pensions development director John Glendinning says:
“IFAs should be looking at their customers' current schemes and see if the
charges are optimum in the current market. We will be making packages
available for our schemes this year, allowing IFAs to make comparisons if
Carrington Investment Consultants head of retirement team William Sallitt
says: “Transferring makes a lot of sense if you can get the cli ent in
something similar with lower charges.”