Savers face 'outrageous' fees to pay more into old pensions-By Dan Hyde

New revelations as the regulator prepares to explain how it will end the poor treatment of long-standing investment, pensions and insurance customers

Regulator preparesis to end the poor treatment of long-standing investment, pensions and insurance customers Photo: Alamy

Savers who try to pay more money into old pension plans are being hit with new, "Seventies-style" rip-off charges, The Telegraph can disclose as the regulator prepares to intervene.

As early as next week the Financial Conduct Authority is expected to make a "highly sensitive" announcement detailing how, following a year-long inquiry, it will end the poor treatment of loyal savers.

It is understood that firms may be forced to write to customers sold pensions, insurance and investments before the turn of Millennium, offering them better deals.

Savers pay an estimated £18 billion a year into 30 million old policies and often face penalties if they reduce their contributions, cash in the funds or want to switch to modern plans.

Now documents seen by this newspaper indicate that pension companies have also begun imposing fees on long-standing investors who want to build up larger retirement funds.

In the first case of its kind Prudential, one of Britain's biggest pension providers, has confirmed that some customers face fees of 3 per cent on the "extra" payment for five years. The charge was introduced in 2013.
Pension experts said the "outrageous" fee for additional contributions was reminiscent of the now-discredited practices of the Seventies and Eighties.
A source close to the regulator said: "Companies charging extra for the privilege of allowing someone to give them more money is scandalous – can anyone be surprised that pensions have a bad name?"
Billy Burrows, an independent pensions expert, said: "All companies need to make it easier for people to get the best deal from pensions – whether that's putting in money or withdrawing under the new freedoms – and they must also work with the regulator to pull down barriers to building larger pots."
Savers with outdated policies were given hope of a better deal in March last year when The Telegraph disclosed news of the FCA inquiry.
Many savers are locked into old plans by so-called "exit" penalties, which can cut the value of a pension fund in half if the customer tries to switch to a newer deal.

_{Martin Wheatley, the head of the City watchdog, promised close scrutiny}
The restrictions were imposed so insurers could recoup the cost of commissions paid to vast teams of doorstep salesmen.
But last year the regulator said it was "unfair" that some insurers used the proceeds from so-called "zombie" funds – which are shut to new customers – to subsidise their attempts to attract new customers.
It said it would "collect information to establish whether we need to intervene on exit charges", but hoped to be able to stop the "exploitation" of customers by less intrusive means.
Although a spokesman for the FCA declined to comment on its progress, a number of executives at FTSE 100 pension firms said the regulator had concluded its investigations.
They expect a report, scheduled to be published before the end of June, to make a series of recommendations to help long-standing savers who the FCA believes are "not given the same priority as new customers".
One executive who spoke with the FCA during its inquiries believed the watchdog was unlikely to order a mass movement of customers to better deals. By law, firms are required to ask permission before moving someone from one contract to another, he said.
The executive, who wished to remain anonymous, said he was prepared to write to customers offering solutions if their pension contracts were no longer appropriate for their circumstances.
A spokesman for Prudential said it was reviewing the charges uncovered by The Telegraph.
It said the fees applied only to certain types of "with-profit" plans that were shut to new customers.
"We introduced a small charge on this with-profits personal pension product to cover the additional costs associated with setting up and servicing customers’ top-up payments," the spokesman said.
"In with-profits funds we believe it is important that costs are attributed fairly to the different members of the fund, and that the cost of setting up or servicing one customer’s new top-ups, should not be borne by other existing customers."

Culled from The Telegraph