Abbey Life Early Exit Charges!

GuitarDave

I understand there is a set up fee, but not that a set up fee costs over two grand and keeps going up with the value of your pension pot. It is a blatant profiteering rip off, and they, I, and everyone knows it.
They will be the loser when the law changes.

Malthusian

You will reach your originally selected retirement age and the transfer penalty will drop off by itself before the Government changes the law to say that if someone enters a contract with pre-agreed charges to do X in the future, and then decides they want to renege on the contract and not pay the previously agreed charge because it's "not fair", they should be allowed to.

When the Government decides that no contract to pay charges in the future is enforcable your money will do you little good anyway because the economy would collapse.

dunstonh

GuitarDave wrote: »

I understand there is a set up fee, but not that a set up fee costs over two grand and keeps going up with the value of your pension pot. It is a blatant profiteering rip off, and they, I, and everyone knows it.
They will be the loser when the law changes.

There are no plans to change any laws. There is a review into exit charges on old business to see if there are any issues and some may get changed. However, it is not expected to result in major changes as most providers dont charge exit fees but instead recover initial fees that were factored in at the start but not levied at the start. Some fees are heavier than others and it will be interesting to see what the decision on those are but dont hold your breathe.

GuitarDave

Well the laws ARE being changed and pension exit fees ARE going to be capped to end this rip-off.
OPinion seems to be that it will take about six months to come into effect, so I will wait until then, and Abbey LIfe can stick their rip off charges, and give me all of my money!

neilvw

Sandsy raises a good point. Have you asked about guaranteed annuity rates at age 60? These can be very valuable, sometimes paying double the market rate or even more.

bmm78

GuitarDave wrote: »

Well the laws ARE being changed and pension exit fees ARE going to be capped to end this rip-off.
OPinion seems to be that it will take about six months to come into effect, so I will wait until then, and Abbey LIfe can stick their rip off charges, and give me all of my money!

At this point there is very little in the way of detail on what exactly is happening.

The announcement was that the law will be changed to place a duty on the FCA to cap excessive early exit fees. No-one has identified what exactly constitutes an "excessive" fee, which plans are affected, what exactly is defined as an "early exit charge" or indeed how the proposed change in law stands alongside existing contracts.

We'll know a bit more once the government publishes the full response to the consultation, but won't know the finer detail until the FCA starts its consultation. There's typically a 3 month period between a FCA consultation paper and their final guidance, and it's unclear when any changes are likely to come into effect.

The government have made the announcement and gained the headlines, but the hard work falls on the FCA. Personally I think 6 months is an ambitious timescale, and it's important to stress that it is intended to be a cap rather than a removal of exit charges. Exit charges will still be there in some form or other regardless of what happens.

It would be unwise to draw firm conclusions one way or the other until we see both the government response and the FCA consultation paper.

dunstonh

Well the laws ARE being changed and pension exit fees ARE going to be capped to end this rip-off.

No they are not. The FCA has been asked to look into it and decide what is fair or unfair. We dont know any more than that apart from exit charges related to funds will not be included in this review. i.e. Market value reductions on With Profits funds are fine.

The providers will be given the opportunity to detail their reasons for charges and some of those charges may be considered suitable. Others may not

For example
1 - A conventional with profits investment with guaranteed sum assured added on day 1 on the assumption the contract will remain until maturity. If the contract doesnt go to the maturity, that sum assured is reduced on a relatively pro-rata basis. Most would consider that fair.
2 - A provider that offered an increased allocation rate. Some did 20% enchancement (i.e. £1000 paid in. £200 added overnight to make £1200). They then set it that if you transferred out within 20 years they would claw back that bonus a 1% a year. i.e. if you took 20% enhancement and transferred out after 15 years then you would have to pay back 5% penalty. Again, most would consider that fair.

3 - Covering the cost advice. Where it is explicitly charged, it will not be considered unfair and not part of the review. However, where it is not explicitly charged but built into capital/accumulation units and carries on being taken long after the cost has been covered, then these are likely to be considered unreasonable.

It will also only apply to over 55s. Not those under the age of 55 (so providers could keep their transfer charges upto age 55).

There are issues as to whether it is legal to change contracts like this. Some have said it isnt. Others have said it could go to the courts to decide. It really depends on the review.

bmm78

Response to the consultation below:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/498871/pension_transfers_and_early_exit_charges_response.pdf

Some points I picked up on:

• The FCA will be setting out its next steps in this process shortly, with a view to implementing its duty to cap early exit charges before the end of March 2017.
  
• ‘Early exit charges’ are taken to mean all costs and value reductions borne by individuals (who are eligible to access their pension savings flexibly) when seeking to access their pension early, which they would not face if they carried out the same transaction at their selected or ‘expected’ retirement date.
  
• Market value adjustments and a loss of terminal bonuses are not considered exit charges.
  
• The FCA is expected to achieve a fair balance between the important public policy objective of ensuring that early exit fees do not pose an unreasonable barrier to people accessing the pension flexibilities and the contractual property rights of pension firms.
  
• The FCA is expected to take into account the wide variety of product designs and charging structures used by providers in developing any cap.

The impression I get from the paper is that the cap will be focused on restricting "profiteering" from providers, rather than messing with the legitimate reclaim of costs.

The government are mindful of the legal implications of interfering with existing contracts, so they are striving for a balance between good headlines and not hitting providers so hard that they take it to the courts.

It's obviously upto the FCA to determine where these boundaries lie. It will be interesting to see how things develop over the coming months.

Malthusian

In short, Osborne has generated some cheap headlines with a grand vision and then dumped the hard bit, the detail, on the FCA.

The FCA have been stung by early exit charges once already when they made a blundering announcement to the Telegraph that they were going to review exit charges and consider forcing insurers to remove them. (This was in 2014, long before Westminster threw its weight behind it.) The resulting headlines wiped £6 billion off insurers' share prices and the FCA had to make a humiliating climbdown and say it never had any intention of interfering with existing contracts at all. In the ensuing exclamationstorm the FCA's director of supervision was thrown to the wolves.

And now, the FCA has barely finished licking its wounds from that humiliation before being told that now it does have to review insurers' exit charges and come up with a cap after all. You'd need a heart of stone not to laugh. It's like beating a dog for chasing sheep, and then deciding that actually you hate sheep and ordering the same dog to go and attack them. That's going to be a very confused, fearful and unhappy dog.

radmm0

Hi guys

I'm over 55 and have two small (less than £10k each) Personal Pensions with two different providers from my early days in permanent employment. I have already cashed in one without having to pay ANY exit fees or charges. But, to my horror, in order to cash in the other policy/pension pot, Abbey Life want to charge me more than 25% of the whole pot, which is staggering and frankly outrageous!!
I have been following the Exit Fee debate since last year, from the Daily Telegraph campaign right up to the Chancellor's autumn statement announcement about the matter in Parliament:

Speaking in the House of Commons today, the Chancellor said: “We’ve listened to the concerns and the newspaper campaigns that have been run and today we’re announcing that we will change the law to place a duty on the Financial Conduct Authority to cap excessive early exit charges for pension savers. We’re determined that people who’ve done the right thing and saved responsibly are able to access their pensions fairly.”

I'm desperate to access the funds in my Abbey Life pension pot, but feel paying a quarter of the pot as Exit Charge/Fee/Penalty rather sharp practice. I therefore contacted Abbey Life directly and found out that regardless of the FCA/Treasury 'investigation' into potentially applying a percentage 'CAP' on Charges they aren't prepared to start this voluntarily.

I then contacted the FCA to enquire about their progress with the matter since the Chancellor's statement and to find out if there would potentially be a scenario (as in the case of PPIs) for 'retrospective' fee refunds. I have contacted the FCA more than once and they have been absolutely useless regarding this matter, suggesting that it could take 2-3 years to arrive at some kind of agreement with the providers and there would be no 'retrospective' Exit Fee refunds to policy holders. Useless, toothless, institutionalised, passing the buck bunch of snails.

Any advice/suggestions from you guys would be extremely appreciated.

Thanks.
radmm0