Abbey Life Early Exit Charges!

GuitarDave

Hi,
I have a smallish personal pension pot with Abbey Life of around £27k.
They do not offer flexible access, so the only options are withdraw the whole amount, transfer the pension to a company who do offer flexible access, or leave it where it is.

They have given me quotes, and if I transfer it I can only transfer £25k. I rang them to query this and they say the charge of just over £2k !!!!! is an early exit penalty!!!!

I am over 55, but they say when I set the pension up I didn't nominate 55 as my retirement age.

How can they possibly charge over £2k for transferring a pension value of only £27k ???

What is my best course of action here?
I know the Daily Telegraph are running a campaign and the Govt are looking at capping charges, but how long is that going to take?

Any ideas appreciated, I am not paying that ridiculous charge to access my own money!

dunstonh

I am over 55, but they say when I set the pension up I didn't nominate 55 as my retirement age.

Which is understandable. The average retirement age in the UK is 63. most people selected 60-65 on their pensions.

How can they possibly charge over £2k for transferring a pension value of only £27k ???

When you set the plan up, there were set up charges. Some providers took these out at the start (i.e. over the first 12-24 months) others built them into capital/accumulation units that saw the set up charges funded over a much longer period. The former tend to have no exit charges. The latter tend to have exit charges to recover the charge that was not paid at the start.

I am guessing that the charge is high relative to value as you were originally paying regular premiums into the plan but they stopped at some point?

What is my best course of action here?

You are looking to break the contract early. So, you have limited choice. Do it or dont do it.

I know the Daily Telegraph are running a campaign and the Govt are looking at capping charges, but how long is that going to take?

Probably 2 years or so. Plus, nobody is expecting them to be wiped out. The tone from the regulator is that they have no problem with exit charges and they exist for good reason. However, the exit charge has to be fair. So, recovering set up costs would be considered fair. Whereas recovering set up costs many times over may not be.

I am not paying that ridiculous charge to access my own money!

You did agree to it and it is you that is breaking the terms. So, you choice is to either wait or take it on the chin.

greenglide

I am not paying that ridiculous charge to access my own money!

Yet another person who doesnt understand that once you pay money into a pension scheme it is no longer "your money".
You entered a contract to invest money into a scheme which would invest it for you retirement.

You wish to change the terms of the contract now? That may cost but you accepted that at the beginning. Failure to read or understand the contract doesnt let you out.

GuitarDave

Thanks for the replies so far. Well the govt are certainly taking notice of the Daily Telegraph campaign, and so I will wait until new rules come in that will forbid excessive transfer charges or early exit penalties that hit you when taking advantage of the new freedoms. If Abbey Life actually offered the proper access freedoms themselves then there would be no need to transfer.

dunstonh

Well the govt are certainly taking notice of the Daily Telegraph campaign

Governments playing to the press is one thing. Changing laws which allow breach of contract is another.

and so I will wait until new rules come

You may have a long wait. The financial media seems to think that most exit charges are valid and would not fall foul of the review. One article quoted an unnamed insider saying that saying it is under consultation is effectively kicking the ball into the long grass as it gets rid of media interest without actually doing anything.

You may get lucky but don't hold your breathe. Expected outcome is that transfer penalties wont get banned but the regulator will be told to use its existing powers to ensure that contracts are not charging unfairly. The regulator already had a planned review on old contracts as it was.

If Abbey Life actually offered the proper access freedoms themselves then there would be no need to transfer.

Abbey have been closed for 15 years. Drawdown has been available for the last 10 years.

When you bought the product, did you tell the person that you wanted to do drawdown at age 55?

GuitarDave

Well, the 12 week consultation on rip off charges is now in progress, with what appears to be a good chance that excessive rip off charges will be banned. So I am happy to wait until I can get my own money out without Abbey Life profiteering unfairly. They will be the loser.

PeacefulWaters

GuitarDave wrote: »

Well, the 12 week consultation on rip off charges is now in progress, with what appears to be a good chance that excessive rip off charges will be banned. So I am happy to wait until I can get my own money out without Abbey Life profiteering unfairly. They will be the loser.

While I think you're wise to keep an eye a consultation, press and possible changes I think you would be naive to get your hopes up.

When will Abbey Life allow you to access the funds without charge?

GuitarDave

Well my retirement date is in 5 years time when I am 60. But they only offer an annuity. I have to opt out if their annuity before then or it becomes automatic. Any time before then t get a charge, so it's a total fix.
I don't mind paying a reasonable transfer fee, but I don't think 10 percent is reasonable by any stretch.

dunstonh

Well my retirement date is in 5 years time when I am 60. But they only offer an annuity.

They also offer penalty free transfers at or after scheme retirement age.

I have to opt out if their annuity before then or it becomes automatic. Any time before then t get a charge, so it's a total fix.

It is not automatic.

sandsy

So your best bet is to wait until your 60 and will no longer incur an exit fee. And transfer out at that point.
However, do check if you have an guaranteed annuity rate (GAR) as many Abbey policies do. And if so, you might be required to take (and pay for) advice before you can access your pension flexibly, depending on how much any GAR is worth.

magpiecottage

GuitarDave wrote: »

Well, the 12 week consultation on rip off charges is now in progress, with what appears to be a good chance that excessive rip off charges will be banned. So I am happy to wait until I can get my own money out without Abbey Life profiteering unfairly. They will be the loser.

The reason for the fee is that set up charges on these older style plans are recovered over the life of the policy.

If you get out early that means the cost needs to be recovered by some other means. They can therefore take it out of your policy or they can, in effect, take it from everybody else.

If they do the latter, they are unfairly managing a conflict of interest between you (who incurred the cost) and their other customers (who didn't). That seems to give them a defence under FCA Principle 8.