Which? posed as a pension consultant and approached five insurance companies, two of which agreed to consultancy charging arrangements where between £400 would be deducted from employees’ pensions. Neither of the life insurers referred to in the article have been named by Which?.
One arrangement reduced employees’ pots by 50 per cent in the first year. Another had a deduction of £400 over the first year and an ongoing charge of £5 a year. Another charged £450 for the first year plus 7.5 per cent of all contributions for the first five years.
Under the most expensive fee structure, someone earning £12,000 a year and making monthly pension contributions of around £82 over five years, with their investments growing at an annual rate of 5 per cent, would see the impact of charges cause their pension fund to be worth 7.5 per cent less than the total amount paid in.
A national newspaper is understood to be covering the story this weekend.
A spokesperson for Which? sayss: “Data from the regulator suggests that most people stop contributing to insurance-based pension schemes after four years. With people switching jobs frequently, Which? believes such charges may mean people never have the chance to build up adequate retirement savings.”
Ros Altmann says: “There are hardly any controls on the amounts that can be deducted, workers will usually be completely unaware of what is happening and will trust their employer to choose them a good scheme. However, the FSA and Pensions Regulator are allowing this to continue and many people’s pensions could be decimated as a result.”