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    • MSE Luke
    • By MSE Luke 19th Jan 16, 4:43 PM
    • 274Posts
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    MSE Luke
    MSE News: 'Rip-off' pension exit fees to be capped
    • #1
    • 19th Jan 16, 4:43 PM
    MSE News: 'Rip-off' pension exit fees to be capped 19th Jan 16 at 4:43 PM
    Withdrawing money from your pension or transferring it to a new scheme could soon cost hundreds of pounds less...
    Read the full story:
    ''Rip-off' pension exit fees to be capped'

    Click reply below to discuss. If you havenít already, join the forum to reply. If you arenít sure how it all works, read our New to Forum? Intro Guide.
Page 1
    • bmm78
    • By bmm78 19th Jan 16, 4:56 PM
    • 420 Posts
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    bmm78
    • #2
    • 19th Jan 16, 4:56 PM
    • #2
    • 19th Jan 16, 4:56 PM
    Definitely one where we need to see the detail behind the headlines.

    This will obviously need to come from the FCA rather than the government. Interesting that the FCA have refused to comment on the matter, much less provide any official confirmation of their plans.

    The words "hospital" and "pass" once again spring to mind.
    I work for a financial services intermediary specialising in the at-retirement market. I am not a financial adviser, and any comments represent my opinion only and should not be construed as advice or a recommendation
    • Paul_Herring
    • By Paul_Herring 19th Jan 16, 5:07 PM
    • 6,794 Posts
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    Paul_Herring
    • #3
    • 19th Jan 16, 5:07 PM
    • #3
    • 19th Jan 16, 5:07 PM
    So, they're going to try to retroactively change the contracts of the pension funds so the pension companies end up losing money?

    They're going to ban Market Value Reductions?

    This should be interesting....
    Conjugating the verb 'to be":
    -o I am humble -o You are attention seeking -o She is Nadine Dorries
    • neilvw
    • By neilvw 19th Jan 16, 7:21 PM
    • 462 Posts
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    neilvw
    • #4
    • 19th Jan 16, 7:21 PM
    • #4
    • 19th Jan 16, 7:21 PM
    Interesting to see what they do with capital-/initial-unit reductions, where early contributions or recent increases in premiums bear a lot of the cost of the initial provider expenses.
    • grey gym sock
    • By grey gym sock 19th Jan 16, 7:40 PM
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    grey gym sock
    • #5
    • 19th Jan 16, 7:40 PM
    • #5
    • 19th Jan 16, 7:40 PM
    there's nothing odd about the idea of regulating consumer contracts, even "retroactively", with the aim of eliminating rip-offs. though i agree that some of the details could be tricky.
    • Paul_Herring
    • By Paul_Herring 19th Jan 16, 7:56 PM
    • 6,794 Posts
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    Paul_Herring
    • #6
    • 19th Jan 16, 7:56 PM
    • #6
    • 19th Jan 16, 7:56 PM
    there's nothing odd about the idea of regulating consumer contracts, even "retroactively", with the aim of eliminating rip-offs. though i agree that some of the details could be tricky.
    Originally posted by grey gym sock
    They're only perceived as "rip-offs" now, because more recently created (and 'cheaper') funds were created without the back-loaded costs the older funds were set up to have if funds were withdrawn early.

    The pension companies, if forced to not retrieve those back-loaded costs will find another way of obtaining that money. This is simply going to be another whack-a-mole exercise with the financial industry.

    Not that I disagree with the principle, I just utterly fail to see how it can work in practice.
    Conjugating the verb 'to be":
    -o I am humble -o You are attention seeking -o She is Nadine Dorries
    • DaveMcG
    • By DaveMcG 19th Jan 16, 7:59 PM
    • 133 Posts
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    DaveMcG
    • #7
    • 19th Jan 16, 7:59 PM
    • #7
    • 19th Jan 16, 7:59 PM
    there's nothing odd about the idea of regulating consumer contracts, even "retroactively", with the aim of eliminating rip-offs. though i agree that some of the details could be tricky.
    Originally posted by grey gym sock
    But the terms of these contracts in the main were known by regulators who made no objections whatsoever at the time and throughout numerous reviews for various reasons thereafter. It would be an gargantuan omnishambles if all these contracts over all these years were suddenly "unfair".

    Insurance companies can be a bit spineless and might buckle down, but I am fairly sure if contract terms were fully disclosed at the time of sale, a legal challenge to any strong-arming by the FCA would be successful.

    Some "exit charges" related to with-profits simply can't be abandoned and any move in that direction would lead to the courts I think.
    • grey gym sock
    • By grey gym sock 19th Jan 16, 8:16 PM
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    grey gym sock
    • #8
    • 19th Jan 16, 8:16 PM
    • #8
    • 19th Jan 16, 8:16 PM
    well, perhaps previous regulators were spineless - not a good reason for inaction from current regulators.

    though i agree there are practical problems here, both with front-loaded charges and with exit from with-profits.
    • dunstonh
    • By dunstonh 19th Jan 16, 9:28 PM
    • 98,305 Posts
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    dunstonh
    • #9
    • 19th Jan 16, 9:28 PM
    • #9
    • 19th Jan 16, 9:28 PM
    There are over 8 million pensions. Around 700,000 have exit penalties. However, its not known how many of those could be considered unfair. Probably a minority in the end but he headline looks good for those that dont care about details.

    With profits is a fund. Not a pension. So, the pension could have no exit charges but a fund within it could. A SIPP could have exit charges if you include the investment. So, its all a bit unknown. I suspect this is just a Tory headline to counter Labour's (as the there was already a review planned). The outcome is likely to see a very small number affected in my opinion.

    The current regulator allows recovery of charges on exit (such as an adviser charge). So, if it allows it now, it should allow it back in the past (as it did). The ones it wants to hit are those that recovered the charge but have continued to levy it right to the end.
    Last edited by dunstonh; 19-01-2016 at 9:57 PM.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • saver861
    • By saver861 19th Jan 16, 9:51 PM
    • 1,378 Posts
    • 800 Thanks
    saver861
    Well I'm not sure how it is perceived if they are unfair 'now'. If these fees were stipulated at the time of initiation, then one presumes they were unfair at that point also. Why was it not dealt with before now?

    I was never convinced by those MVR's. A few years ago I enquired about moving some pension funds and I was told the MVR was over £600. I left it and some months later the MVR was £0.

    However, if companies are ratcheting up charges as a result of the freedoms, then that might be a different matter.
    • dunstonh
    • By dunstonh 19th Jan 16, 9:59 PM
    • 98,305 Posts
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    dunstonh
    Well I'm not sure how it is perceived if they are unfair 'now'. If these fees were stipulated at the time of initiation, then one presumes they were unfair at that point also. Why was it not dealt with before now?
    Most of these contracts that are now considered unfair would have been built in the period of high inflation, boom/bust. They were priced to that model.

    However, if companies are ratcheting up charges as a result of the freedoms, then that might be a different matter.
    There is no evidence of that. Ironically, only modern plans can do that. The original life company pensions couldnt change terms once offered.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • saver861
    • By saver861 19th Jan 16, 10:06 PM
    • 1,378 Posts
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    saver861
    Most of these contracts that are now considered unfair would have been built in the period of high inflation, boom/bust. They were priced to that model.
    Originally posted by dunstonh
    Ok that's a fair point that I had not considered. However, from that perspective there has been no inbuilt flexibility for inflationary changes?

    There is no evidence of that.
    Well I would not expect reputable companies to be doing it in any case, not that I am naive enough to think they will not stretch any advantage they can get.
    • Paul_Herring
    • By Paul_Herring 20th Jan 16, 8:04 AM
    • 6,794 Posts
    • 3,425 Thanks
    Paul_Herring
    Well I'm not sure how it is perceived if they are unfair 'now'. If these fees were stipulated at the time of initiation, then one presumes they were unfair at that point also. Why was it not dealt with before now?
    Originally posted by saver861
    Maybe we should get WASPI involved....
    Conjugating the verb 'to be":
    -o I am humble -o You are attention seeking -o She is Nadine Dorries
    • dunstonh
    • By dunstonh 20th Jan 16, 8:17 AM
    • 98,305 Posts
    • 66,562 Thanks
    dunstonh
    Ok that's a fair point that I had not considered. However, from that perspective there has been no inbuilt flexibility for inflationary changes?
    You are mostly going back to 1970s-80s contracts (with a small number creeping into early 90s). Software was hard coded and contracts were contracts. Flexibility was not a word heard of.

    Well I would not expect reputable companies to be doing it in any case, not that I am naive enough to think they will not stretch any advantage they can get.
    Interestingly, some of the companies that have appeared in the media supporting the abolition actually have exit charges. Just under a different name. Both HL and A J Bell appeared in the press supporting the abolition but both of them have exit charges.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Linton
    • By Linton 20th Jan 16, 9:54 AM
    • 10,640 Posts
    • 10,990 Thanks
    Linton
    ....... However, from that perspective there has been no inbuilt flexibility for inflationary changes?

    Originally posted by saver861
    Insurance companies lost a lot from the lack of "inbuilt flexibility for inflationary charges" as many pensions set up in the early 80s had guarantees appropriate to inflation of >10%. When inflation fell the insurance companies still had to pay out. Some went bust or were perhaps bought out as the only alternative. That's what happened to Equitable Life. All of us, including actuaries it seems, have difficulty conceiving of a world very different to the current one.
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