Pension early exit fees to be capped at 1%, regulator confirms

Former_MSE_Lucinda

The amount charged for early withdrawals or transfers from pension pots will be capped at 1% from 31 March 2017, while new pension contracts taken out after this date will face no early exit charge at all....

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'Pension early exit fees to be capped at 1%, regulator confirms'

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lisyloo

Anyone know if this applies to MVRs. I have a 28% MVR with Phoenix life and would like to transfer to my SIPP (I'm aged 48).

dunstonh

lisyloo wrote: »

Anyone know if this applies to MVRs. I have a 28% MVR with Phoenix life and would like to transfer to my SIPP (I'm aged 48).

No. An MVR is at fund level and not included. Also, at aged 48, you would not be captured under this rule change either.

lisyloo

Ok but first sentence in the article says "...or transfers from pension pots".
Why would I not be included?
Have I misunderstood what is meant by transfer?

dunstonh

lisyloo wrote: »

Ok but first sentence in the article says "...or transfers from pension pots".
Why would I not be included?
Have I misunderstood what is meant by transfer?

I just took a look at the article and MSE have not given the full information. The rules are 1% from age 55 (or earlier if there is as protected scheme age). So, if aged 54 or under, you do not qualify until 55 to get this cap.

lisyloo

I've been googling and it's either scant articles or in-depth consultation papers.

Ok, but can transfer to my SIPP at 55 then? (Pretty sure I won't be retiring at 55).

dunstonh

Ok, but can transfer to my SIPP at 55 then? (Pretty sure I won't be retiring at 55).

yes. They will cap the pension charge to 1% at that point (assuming they havent withdrawn the charge altogether as many providers have). However, MVR is exempt. That will drop to zero by scheme retirement age if it has not recovered earlier.

lisyloo

Thanks, retirement age for the Phoenix scheme is 65 :-( but it's not a large part of my overall pot.

Malthusian

Is this one of those pensions with a 4% guaranteed growth rate, out of interest?

They often have very high MVRs because although Phoenix have to quote you a fund value which increases by 4% each year, the underlying With Profits fund has not actually performed anything like that well.

lisyloo

I am not aware of any guaranteed growth rate and I would have expected my advisor to have mentioned it recently when we discussed transfers but it's not impossible. I contributed between 1994 and 1997.
The MVR is actually 40% of the with-profits fund.
The 28% mentioned earlier was the penalty for transferring the total, which includes an early (pre-65) exit charge and MVR of 40% on the with-profits (46% of my holding).


I have not complained (although it does seem very harsh) but obviously I'd prefer to move it from Phoenix who charge 2.1% to my SIPP where I get good advice and active management for a much lower fee if I could, but I am not going to do so considering the penalty - yes I realise the ongoing 2% and poor performance is somewhat punitive - rock/hard place springs to mind.
It's not a large amount in the whole scheme of my pensions (about 7%).

I don't have high hopes that they would suddenly remove the MVR as they probably have some reason (good or otherwise) for it, but I will ask my advisor to review in the future. I'm pretty well organised about that.

LHW99

Worth keeping an eye on, as MVR's do seem to go up & down over time.