Early withdrawal fees

Early withdrawal fees

Remarkable Telegraph article on a category of 'fee' charged by presumably more than one wealth manager:

"St James’s Place, the FTSE 100 wealth manager, has long charged its customers an “early withdrawal charge” of 6pc, decreasing over six years. The exit fee, which applies to all pensions and investment bonds, starts afresh on any new investments subsequently made by the customer.

Ros Altmann, the former pensions minister, said the Financial Conduct Authority must force firms to explain to customers what damage “unacceptable” high exit fees could do to their savings.

Baroness Altmann said: “Not everyone has understood what the charges are. That is clearly unacceptable. Customers need to be clearly told upfront, and confirm they understand that if they leave they will face a penalty.

“I think that should be squarely in the FCA’s remit. Unfortunately the industry is very good at hiding fees.”

Steve Webb, who is also a former pensions minister and now director at Royal London, the pension company, added: “The big principle has got to be transparency. People often don’t fully understand that if they want to access their cash there is a substantial cost to do so.

“People are bombarded with information. This stuff can’t be in the small print, it’s absolutely fundamental.”

And this is SJP's rationale for these charges:

 “We have a variety of charging structures across our range of investments, some of which do include an early withdrawal charge, reducing over the first six years, and others have an initial charge.

"Both allow us to cover the cost of providing advice, as well as the underlying investment solutions. These will have a similar effect if the client chooses to remain invested for only a few years.

“When investing it’s important to remember this is a medium to long-term commitment. The average investment with us remains invested for 14 years.

“However, to allow some flexibility, our products do allow a proportion of the investment to be withdrawn without the early withdrawal charge applying.

"All charges are explained to clients by their adviser prior to investing, and are set out clearly in a written personalised illustration. We believe in clarity for every client so they can make a fully informed decision.”


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