In a recent interview with The Telegraph, Baroness Altmann stated that she believed pension providers should “write off” fees, penalties, and charges that are being charged to savers who withdraw their funds. The pension’s minister went on to say that these penalties that are levied as “exit charges” should be cancelled as they are in effect a rip off.
She went on to say that these fees, which can account for up to a massive 40% of a person’s pension plan, should never have been permitted in the first place, and she even went so far to say “I beg the pensions industry, just look after your customers”. Strong stuff coming from a government minister.
In the Telegraph interview she then added:
“There are some insurers being fair, writing off some of their back book [income from old policies] and bringing down the old legacy charges – that’s great, they get it. My message is, if you don’t look after your customers, then whatever government does to get people into pensions, they are not going to stay.”
Under the current way of working, more than 2 million savers are affected with cuts to their pension fund values if they try to withdraw cash before they are aged 55. Some of these exit penalty clauses could have been written into pension plan contracts as far back as the 1970s – the reason being at the time, so that insurance and pension companies could claim back the cost of door to door salesman commissions that were prevalent at the time.
However, in many cases at the point the saver reaches 55 years of age, the commission will probably already have been recovered with the annual fees that have been charged historically. So, with that in mind, any exit penalty will simply serve to be a profit for the pension firm.
Later in the interview, Baroness Altmann encouraged insurance and pension companies to voluntarily discard some of their future profits that are gained via exit penalties.
She summarised the feelings of many people in the finance industry when she said that unless the pensions industry could show that it treated clients fairly and could be trusted to do so, then the UK Government would be unable to really help future savers in retiring with little in savings. Her quotes regarding this are as follows:
“The Government is doing its bit in getting people better pensions in later life, but it can only do so much. We are giving the industry their customers on a plate. If customers are happy they will increase their contribution rates … which needs to happen eventually.”
“But there is a fear that if customers continue to hear negative messages or don’t feel looked after by the industry, that it’s fair and that it’s doing something for them, they’ll vote with their feet.”
What do you think about pension companies adding these unjust fees onto client contracts? Each day we deal with people who have been treated unfairly in the pensions industry, for example, those that were mis-sold a pension and want to claim compensation.
If you would like our specialist lawyers to look at your case, please get in touch with us today so we can give you some free advice on what the options could be for you.