Personal Pension Transfer Penalties

Crispy_W

I am wondering if anyone has had any success in arguing down transfer penalties.

I have recently reviewed my pension provisions and have moved some of my less productive products to a new provider. Most of these have been done with no or minimal transfer fees, but Axa have seen fit to take a lump equating to 10.5% of my fund as an exit penalty, which I very deeply resent.

The paperwork that they have provided makes note of the complex formulas they use in determining transfer values, and the use of a 'Market Reduction Value' (MRV) factor that is used as a defensive measure to protect the value of funds.

I have had some luck in the past in having mortgage exit fees which are disguised as admin fees refunded, but I am not sure if this is the same thing, as they do note that it is a penalty payment. However I do intend to complain anyway as there is no indication of the size of the penalty, and I do feel that 10.5% is a bit steep.

I'm sure that this has already been discussed somewhere on this board, and if so please feel free to point me in the right direction.

Any input or experiences would be welcome.

EdInvestor

Market Value Reductions are used on surrenders or transfers of With profit investments to align the value of the underlying fund ( your asset share) with the current value on paper of your investment.These values can get out of line when there is a major stockmarket crash, as in 2001-03.

You'll be aware that the stockmarket has still not regained its peak as at the end of 1999 of something like 6800 - it is currently hovering around 5900.The MVR is used because it is not fair for people leaving early to take more than their fair share of the WP fund - this just penalises other investors.

When did you invest the money into this pension with the 10.5% MVR? The timing is important in determining whether or not it is fair.

Celtic

I moved my Standard life endowment fund the first day that I could .
They only charged £100-200 .
To be honest moving the funds to a better place was all that mattered !

EdInvestor

They only charged £100-200

How much is charged depends on size of fund and when the money was invested.

As far as Standard Life is concerned, if you are in With profits as part of a pension,(as opposed to an endowment)you might be well advised to see what other funds are offered within that pension wrapper, rather than transferring the whole thing.

SL offers some good funds, both internal and external, plus its charges are low.There's shouldn't be any need to incur the extra costs of a transfer, though you will still pay the MVA to get out of WP.

Crispy_W

I first started paying into this product with Sun Life in 1996, before Axa took them over.

I moved my monthy payments elsewhere several years ago when it became obvious that the fund was not performing well, but left it paid up as my IFA advised me that Axa were imposing hefty transfer penalties.

I can live with that in principle. However I have recently moved funds from other providers, namely Nowich Union, Clerical Medical and Scottish Widows. None of those have seen fit to impose charges other than a minimal admin fee.

I agree with Celtic that the important thing is to get the money working harder and take the kicking The fund was only worth around £8400 so the penalty of £905 is not the end of the world, I just resent the principle of the thing.

If I leave the money in place, I get a poorly performing fund, if I transfer it, it gets plundered by Axa.

I was on the edge of a rant then, did you spot that?

EdInvestor

When did you stop paying in?

If most of the money was paid in 1996-2000 I'd have thought it was worth challenging them on it, especially if you're not being penalised at other life offices for WP pensions accumulated over the same period.

If you were still paying in up to around 2003, then it might be justified.

They are probably charging you an early leaving penalty as well.Why not make them justify it?You have nothing to lose. Financial companies often try it on (bank penalty charges are a good example) on the basis people are too apathetic to complain.

Let us know how you go.