1st April 2016
Platform and pension firm Old Mutual Wealth is reducing exit fees where they exist on older-style UK pension contracts and capping them at 5% for all customers aged 55 or over.
The firm, previously known as Skandia, will remove a policy fee that applies to certain legacy pension contracts when regular contributions are cancelled or reduced ahead of the selected retirement age.
It has done so due to the advice of its independent governance committee – a recent regulatory requirement.
Exit charge cap
Old Mutual Wealth says it has been reviewing customer behaviour since pension freedom legislation came into force in April 2015, with some customers wanting to access their pension savings before they reach their originally selected retirement age.
From 1 July 2016, exit charges for UK pension customers will be reduced and for those eligible to flexibly access their pension these charges will be capped at 5%. The firm says that following these changes the average exit charge across all applicable pensions will reduce by around 2%. There are currently around 3,700 customers aged 55 or over in older-style pension contracts that attract exit fees.
Any such contracts were taken out at least 17 years ago when the costs incurred upfront to establish the plan were spread across the term that was selected when it was originally set up.
Removal of paid-up charge
The firm is also Old Mutual Wealth will also ensure that regular savers have the freedom to stop or redirect their regular contributions without incurring a fee.
The removal of this fee will benefit around 9,400 existing policyholders who will see total ongoing charges reduce by around 22% on average, effective from 1 April 2016.
Steven Levin, CEO of Old Mutual Wealth’s investment platform, said:
“As a modern wealth management business, we are focused on ensuring customers receive good outcomes. The pension market has changed considerably and we want to ensure we are making improvements for those customers in contracts that were set long before the current rules were introduced.
“Where exit fees are still in place, due to the structure of older contracts, we want to ensure customers receive good value for money. We are introducing the cap for all affected pension customers – whether they are individual pension customers or members of occupational pension schemes.
Richard Butcher, PTL, Chair of the Old Mutual Wealth Independent Governance Committee, said:
“Old Mutual Wealth has been transparent and supportive of the work done by the IGC. I am delighted that they have decided to take a proactive and positive approach to the Committee’s findings to enhance the value-for-money they provide to their occupational pension customers.”