In the first report of its Independent Governance Committee, Royal London said that the impact of the pension freedom changes and members taking their
pension benefits early has led to a small increase in the average exit charges applying to members accessing their Royal London workplace pensions. However almost all members (96%) faced no exit charges.
Other changes include the removal of a policy fee on certain legacy workplace pensions that are no longer receiving contributions, which the report said "is of particular benefit to customers with smaller pension fund values".
Royal London also said it will increase the overall level of fairness in some of the more complex charging structures, and improve how the loyalty bonus structure works on some legacy products.
The changes are expected to benefit over 27,000 workplace pension members.
Phil Green, Chair of the Royal London IGC, said:
“We believe that Royal London offers a high quality proposition but we do have a few recommendations based on our analysis of the value for money provided. These proposals mainly impact legacy scheme members who should benefit from improved terms to their pension policies in the near future. Royal London has agreed to act quickly to implement our recommendations and it is estimated that the cost of the changes proposed and agreed will be over £15 million. This represents a reduction of the charges on the affected workplace pensions of over 20%."
Royal London’s Director of Policy, Steve Webb, added:
“We are pleased that the Committee found that the vast majority of Royal London customers were getting value for money from their workplace pensions. This is particularly important to us because as a mutual our first priority is securing the best outcomes for our members – the people who own our business. We will take action where it has been identified so that the terms of these minority of policies, set up some years ago, are updated as soon as possible.
“We firmly believe it is vital that we offer our workplace pension members all-round good value for money. Many members of our workplace pension schemes are also mutual members of Royal London and so will benefit from the Profit Share arrangement that we announced last year.
“Royal London was already reviewing the value for money of our existing workplace pensions before the IGC was set up. The Royal London IGC brings objectivity and a ”fresh pair of eyes” to this work.”
Earlier this week, Scottish Widows announced that it will be removing all exit fees across its workplace pensions, and is in the process of reviewing the exit charges on its individual pensions.
The government recently announced that it will limit early exit charges for pensions by introducing legislation which requires the FCA to cap early exit charges. The regulation will be introduced before the end of March 2017,
