The FCA is set to investigate the £150bn closed life and pension fund market, according to the Telegraph. The regulator is concerned these customers are being exploited by insurance companies, and may consider banning the steep exit fees that many policyholders face, effectively locking them into poor policies.
The FCA review will reportedly cover pensions, endowments, investment bonds and life insurance policies set up in the 1970s, 80s, and 90s.This echoes the findings of the OFT in 2013, which identified £30bn of pensions set up before 2001 which were at risk of carrying high charges.Tom McPhail, Head of Pensions Research:”This FCA review could finally set millions of investors free from their zombie life and pension policies. These policyholders often find themselves between a rock and a hard place, facing the choice between staying in a dud fund and paying a penalty to move elsewhere.
“Many of these policies will no longer be held in the name of the original insurance company who issued them, because so many of these companies have been swallowed up by bigger rivals and consolidation companies. As the FCA investigates this issue, it’s probably a good time for investors to dust off their old documents and find out exactly where these zombie policies are buried.”
Employers need to act quickly if they want to avoid disgruntled employees. The Budget proposed big reforms to the way UK retirees will take their pensions. Failure by pension providers and the insurance industry to give individuals a fair deal on retirement was highlighted in a recent FCA report and this surely has been a factor in the changes, described by the Chancellor.
