Standard Life and Legal & General have clashed over charging different annual management fees on deferred and active members of pension schemes.
The active member discounts (AMD) allow pension schemes to administer a two-tier fee structure for active and deferred members and some of UK’s biggest pension providers including Aviva, Aegon, Standard Life and Scottish Widows offer the AMDs.
“We feel that the right thing for early leavers to do is to take their pot with them either to their next employer’s scheme or to an aggregator vehicle such as a SIPP,” said Adrian Boulding, L&G pensions strategy director.
“We hope to see some DWP intervention to change behaviour so this becomes the norm but people need support and encouragement to make this happen and not to be beaten with a stick via AMDs,” he added.
However, John Lawson, head of pensions policy at Standard Life said businesses see AMD as a legitimate way for rewarding current employees.
“I am not convinced that AMDs are anti-member, provided that the leaver’s charge is not excessive and is at or below the level of charge they would have to pay to buy a pension themselves on the high street,” said Mr. Lawson.
“But what AMDs should not do is penalise ex-members in order to give current employees a better deal,” he added.
The Pensions Regulator had announced last week that it is planning “potential refinements” to the way pension scheme charges and costs are disclosed.
“All active and deferred members within a pension scheme should be treated fairly and equally enabled to achieve a good outcome from their savings”, said a spokeswoman for the Pensions Regulator.