Old Mutual Wealth is slashing fees on thousands of older UK pension contracts.
The South African financial firm said that it is cutting fees to bring its older contracts in line with new changes to pensions fees elsewhere. As a result exit fees will be reduced where they exist on older-style UK pension contracts and capped at a maximum 5% for all customers aged 55 or over.
Old Mutual Wealth said that it has been reviewing customer behaviour since pension freedom legislation came into force in April 2015, with more and more customers wanting to access their pension savings before they reach their originally selected retirement age.
Removal of paid-up charge
It pointed that because of increased retirement options alongside the progression of auto-enrolment within the pension and savings market, it now wants to ensure that all regular savers have the freedom to stop or redirect their regular contributions without incurring a fee.
Old Mutual said will also remove a policy fee that applies to certain legacy pension contracts when regular contributions are cancelled or reduced ahead of the selected retirement age.
The removal of this fee – effective from tomorrow (April 1, 2016) – will benefit ‘around 9,400 existing policyholders’ that will see total ongoing charges reduce by around 22% on average.
“Where exit fees are still in place, due to the structure of older contracts, we want to ensure customers receive good value for money,” said Steven Levin, CEO of Old Mutual Wealth’s investment platform. “We are introducing the cap for all affected pension customers – whether they are individual pension customers or members of occupational pension schemes,
‘Pension market changed considerably’
“The pension market has changed considerably and we want to ensure we are making improvements for those customers in contracts that were set long before the current rules were introduced,” he added.
Additionally, from 1 July 2016, exit charges for UK pension customers will be reduced and for those eligible to flexibly access their pension these charges will be capped at 5%. According to Old Mutual the average exit charge across all applicable pensions will reduce by around 2% following these changes. There are currently around 3,700 customers aged 55 or over in older-style pension contracts that attract exit fees.
The changes are part of the company’s Independent Governance Committee (IGC) that has been investigating fairness in workplace pensions. Its first report is set to be released on April 6, but Old Mutual Wealth said that it is extending the impending changes to also benefit its retail retail customers.