Thread: Pensions Companies Have Much Higher Unlawful Charges

PENSIONS COMPANY’S DEVIOUS CHARGES

Pensions companies extort excessive charges too. Can someone advise me whether it would be possible to reclaim the huge £16000 odd charge incurred as described below. I feel I have been comprehensively swindled.

In my thirties I thought I would put money into an M&G private pension. I already invested in their Recovery unit trust and wanted to use that unit trust for a pension fund which M&G provided.

When I contacted M&G they said that although they allowed individuals to invest money directly into unit trusts, M&G did not sell pension plans directly to customers but that if you wanted an M&G pension plan you were obliged to go through a broker.

M&G duly gave the name and address of a broker they recommended (described by them as ‘their’ broker) and I could buy my M&G pension plan from them and then the money would be invested in M&G unit trusts as I requested.

I did not want and did not get any ‘advice’ from the broker. I had already decided exactly what I wanted to do and all the broker did was hand me a form of application to fill in, which I did.

There were two issues that were discussed.

I asked the broker if I was to pay him any fee or if any money was to be taken from my pension savings to make any payment to him.

He said there was no fee from me and that there would be no money taken from my pension savings to pay him. He said he was paid by M&G.

He did say, however, that for the first two years my monthly pensions savings would be invested in something called ‘capital units’ within the M&G Recovery fund and after that the savings would be invested in something called ‘accumulation’ units within the Recovery fund.

He said this was a special provision applicable only for pension plans but did not explain the precise nature of the difference and meaning of these two types of ‘unit’ within the Recovery fund. He was at pains to stress most strongly that there were to be no charges to me for taking out this pension plan.

Despite being a moderately intelligent and streetwise person, I failed to grasp at that time that I was being completely misled about charges.

Two decades later when I was obliged to cash in this pension I discovered that:

- these ‘capital’ units were specifically designed to milk money from me for as long as I owned them because they were specially designated to have a much, much higher annual management charge levied on them than the ordinary ‘standard’ accumulation units.

- and that (shortly after taking out the pension plan) I could have ‘sold’ them within the pension fund at no cost and re-invested the proceeds in the ordinary ‘accumulation’ units which had only the much lower, standard annual management charge.

Fortunately I ceased putting money into this pension fund relatively soon so the fund was only worth about £16000 when I wanted to convert it into a pension many years later.

However, when I did a calculation I discovered that if all my savings had been invested in the ordinary accumulation units as I had wanted them to be and expected them to be and had asked them to be, then the fund would actually have been worth almost exactly double the £16000 amount and I would have been £32000 and not £16000. That would have made a material difference to the whole purpose of cashing the fund in.

On making enquiries to M&G they explained that these ‘capital’ units were so designed in order to pay the broker a fee (indirectly through M&G) which would continue to be paid him as long as I held such ‘capital’ units, but that I was free to sell them at some point whereupon I would then not lose out by making continuous annual payments to a broker I had been forced to go to by M&G against my will in the first place and who had offered no service beyond handing me a form to fill in.

At no stage did either M&G or the broker tell me what these ’capital’ units were for and how they worked and that I was free to sell them to rid myself of this hidden financial burden of continuous fee payment over twenty years to a broker who had done nothing more than hand me a form and spend half an hour with me while I filled it in.

A £16 000 fee for half an hour’s work. I don’t think that is very reasonable, does anyone else think that sounds reasonable ? Or would you describe it as just downright theft ? Answers please.

The second issue discussed which turned out to be a purely dishonest mechanism devised by M&G was when we came to a tick box on the pension application form which asked what age I might like to ‘retire’ at.

I asked the broker how on earth was I to know in my thirties what age I might choose to retire at in twenty to forty years time.

He said it ‘didn’t matter’ what age I put in the tick box as it had no signifigance and did not make any difference to any part of how my pension plan worked. He said I could put any age in the box, it was irrelevant. So I simply put the standard age of 65, on his advice.

When I came to cash the pension in at age 58 years old M&G told me there was ‘an early redemption charge’ as I was cashing in the pension at 58 years old and not the 65 years old that I had originally put on the application form.

Cutting a very long story short here ( I spent many, many hours chasing M&G about this) when I asked M&G how on earth they could make such a charge and justify it and what on earth it was for, they finally told me it was to discourage everyone who had a pension plan with them from cashing pensions in all at the same time because this would overload their clerical abilities and they wouldn’t have enough staff to deal with with all the applications at the same time.

Can you credit it ? Are we living in cloud cuckoo land or what ?
It seems the financial institutions are certainly living in cloud cuckoo land or some other surreal fantasy place where everyone’s mind is away with the magic mushroom fairies !

Fortunately, my pension fund was small. Most people have much, much larger pension funds. If I had continued saving as I originally intended it looks as though this ‘early redemption charge’ would be and eye watering £75000. Can you credit it ?

Can anyone give me some comments on this story please. I really would like to know what other people think, particularly in regard to getting this money back as it is clearly an unfair charge on both sums. Plus I was blatantly misled at all times.

Cheers.

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Can anyone advise me on whether an early redemption charge on a pension fund would be recoverable ?

I was forced to state an arbitrary and meaningless retirement date when I took out the pension plan in my thirties and was told at the time by the broker the date I put on the form was meaningless.

When I converted the small pension fund into a pension recently I was charged a huge penalty because I was taking my pension at age 58 and not the arbitrary age of 65 I had 'randomly' put on the form so many years previously when no person would be in a position to answer the question 'what age are you going to retire at '.

Would this be a case for following the same procedures directed against the banks for their unlawful charges ?

Would this early redemption penalty be ' an unlawful charge '?

I'm not sure how much help you'll get on this one due the complicated nature of your claim.

I work for a pensions software company and know a certain amount about pensions but this is way out of my league.

I would say you have been mislead, and this may even be a case of obtaining by deception, but proving it looks difficult.

Also the legal grounds we are claiming bank and credit card charges on may not apply to pensions.

The early redemption penalty may well be claimable, depending on what they say it is for and the wording in the contract. Are you able to post any moe details of this? If it can be pinned down to being a breach of contract clause you could probably claim it back. I can't see what else it would be for, but the way pensions are calculated is a minefield.

I will try to read through this properly when I have a bit more time and see if I can point you in a helpful direction.