Pension firms are making it difficult for people to get better deals for their retirement fund by imposing huge "exit fees" for anyone daring to switch company, a retirement expert warned this week.
Tom McPhail, head of pensions research at advisers Hargreaves Lansdown, warned that pension exit penalties make it very difficult for investors to take control of their retirement fund and to make sure that they are getting good value for money.
"Even if they have checked what charges they are paying and how well their funds are performing, they still may not be able to move their money because their pension company is blocking the exit with a penalty for leaving," he said.
Mr McPhail said there is now a strong case to introduce a moratorium on exit penalties where they amount to more than a reasonable administration charge.
"Banks used to impose exorbitant charges whenever someone went into the red, just to write and tell them they were overdrawn," he pointed out. "In the end, consumer outrage put an end to that kind of exploitative behaviour. I think we are going to see similar pressure on pension companies with exit penalties."
He added that we need a simple way for investors to know whether their pension is a good one or not. "At the moment, disclosure rules mean that investors are swamped with too much information, making it hard for them to pick out the bits that really matter," he said.Reuse content