12th June 2015
Royal London has said pressure should be put on insurer to levy ‘reasonable charges’ for pension access but argued legislating for a charge cap would be a bad idea.
Following reports that retirees were being charged large sums for accessing their pension cash under the new freedom rules, some have called for a drawdown charge cap to be applied, mimicking the cost cap on workplace pensions.
Earlier this week, Labour peers urged the government to intervene on ‘ridiculously high’ drawdown charges because investors were being ripped off ‘daily’.
However, the mutual insurer Royal London said capping drawdown would be anti-competitive.
‘Royal London would support Lord Flight’s comment in that it would be better to put pressure on providers to offer reasonable charges than to use legislation,’ said Fiona Tait, pension policy specialist at Royal London.
‘Royal London does not support artificial controls, such as charge caps. We believe that a competitive market is the most effective way to drive a good deal for customers. However, for the market to work efficiently it will need pressure from those that really understand customers’ needs, like impartial advisers, to work on their behalf.’
She added that Royal London did not agree with those that say accessing pensions costs a fortune.
‘Royal London does not agree that people have to pay a fortune to access their pensions as Lord Hughes and Baroness Drake have suggested,’ said Tait.
‘For example, we make a simple one-off charge to customers for setting up flexible access to their pension – a single charge of £184 with all subsequent withdrawals free.
‘We also believe that it must be very clear what is and what isn’t included in any charge cap. Plus, consumer should be allowed to buy additional features, on top of what is covered in the basic charge, if they wish or are advised to do so.’