Tens of thousands of retirement savers may have paid unfair charges to take money from their savings under new pension freedom rules.
The UK’s regulator, the Financial Conduct Authority (FCA) is writing to pension providers demanding they hand over information about their charges to customers.
The investigation is part of an ongoing review of how pension freedoms are working for consumers.
New pension freedoms allowing retirement savers to take their money to spend how they want were introduced in April 2015.
In the first six months after the freedoms started, £4.7 billion was drawn down by savers over 55 years old.
Savers paying to withdraw their pension cash
Many savers have complained that they received much less money than they believed they would due to charges made by providers.
Initial inquiries by the FCA revealed 10% of retirement savers would pay up to £1,000 for taking money early from their pensions, while 62,000 savers would have to pay 40% or more of the value of their pension savings.
The FCA wants to know what companies are charging consumers to take money from their savings and whether the charges vary according to the size of the fund.
There is some suspicion that savers with modest funds of up to £50,000 pay more in charges as a percentage of their cash than savers with larger funds.
Consumers not getting a fair deal
“Collecting this information will help us assess whether firms are charging similar fees for similar products and services and whether any hidden charges are involved in the transactions,” said an FCA spokesman.
“Our aim is fairness for the consumer and competition within the industry.”
Some financial experts argue that the regulator should cap charges and make the way providers explain them to consumers clearer.
“Workplace pension charges are already capped and it looks like this is going to happen to private pensions as well,” said Simon Haight, a pension lawyer.
“It looks like regulation of pension charges will be imposed because the providers cannot get their act together to offer consumers a fair deal.”
Consumer champion Which? also supported the FCA investigation because charges can vary considerably between companies, said a spokesman.
