First, some background on special benefits and exit fees.
Special benefits can refer to a variety of different features, such as Defined Benefits, Guaranteed Annuity Rates and Life Cover on defined contribution pensions. The most valuable of these are known as “safeguarded benefits” and include a guaranteed element of future pension income. You are required to obtain advice prior to transferring pensions with safeguarded benefits that have a total value over £30,000. You can learn more about special benefits here.
Conversely, exit fees can reduce the value of your pension. Changes to pension exit fee charges in 2017 now mean that those at the normal minimum pension age, currently 55 (57 from 2028), who wish to withdraw from or transfer their pension will have any exit fees capped at 1% of the value of their pension pot.
Thankfully, modern pension providers such as PensionBee do not impose exit fees on savers who wish to withdraw from or transfer their pension before the retirement date on their policy. However, those who started their pension before 2004 may still find that there’s an exit fee or special benefits associated with it. Overall, these features are rare but important to know about. Therefore, we utilise a risk-based approach to checking for exit fees and special benefits.
What’s our risk-based approach?
We enable customers to transfer a pension to us whether they’re able to share their pension policy number (or other appropriate identifier) with us or not. However, our approach to checking for fees and special benefits depends on whether we’ve been supplied with a policy number (or other appropriate identifier) or not.
Transfer requests without a policy number (or other appropriate identifier)
When a customer requests a transfer without a policy number (or other appropriate identifier), we’ll contact the customer’s old pension provider to request the necessary paperwork and automatically check this over for the presence of any exit fees or special benefits prior to the transfer. We’ll then inform the customer of any exit fees over £10 as well as any special benefits that we find.
Transfer requests with a policy number (or other appropriate identifier)
In the case of a transfer request with a policy number (or other appropriate identifier), our approach to checking for fees and benefits differs according to the risk category the old pension provider or pension category falls into. There are three different risk categories - green, amber and red, and each has its own approach.
Green: Providers or policies in this category don’t have exit fees or special benefits based on the data we’ve gathered. In these cases, we don’t perform checks as no fees or benefits are expected to be found.
Amber: These are providers who we’ve found may have exit fees or special benefits but only in very rare circumstances. Customers of these providers must confirm they have checked for fees and benefits themselves. Alternatively, a customer can ask us to check with their provider on their behalf.
Red: These are providers who we’ve found are more likely to have exit fees or special benefits. As such we automatically perform checks on these providers’ policies.
If we find a provider that has an exit fee of more than £10 we’ll always seek our customers’ permission to proceed with the transfer before taking action. It’s important to note that unfortunately, we can’t guarantee to find an exit fee or special benefits as we rely on clear information from third parties. If the exit fee is below £10 we will proceed with the transfer.
Adopting a customer-first approach
At PensionBee it’s important that the way we detect and report any exit fees and special benefits is made transparent to our customers. Our approach to this is significantly more customer-centric than that of other pension consolidation providers.
As there’s no regulation requiring providers to check for fees or special benefits, many simply suggest that their customers check and confirm for themselves. In contrast to other providers, we’ve developed an approach that places the interest of our customers first by taking it upon ourselves to routinely check on their behalf when the likelihood of finding exit fees or special benefits is high. We combine this with the ability for our customers to check for themselves where they wish to.
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
Last edited: 06-04-2024
