The Times has recently been looking into the charges and exit penalties imposed by one of the largest ‘direct to consumer’ pension providers.
It appears St James’s Place (SJP) was not particularly forthcoming in providing the charges to a retired Solicitor for 3 years, until The Times stepped in. However, he was feeling so frustrated by his experience, and what he saw as a lack of transparency, that he quit the company.
The former pensions minister, Baroness Altmann, called this “shocking”, adding: “What do they have to hide? If a customer asks what the costs are and they still don’t understand, or it’s not explained transparently, that’s a problem.”
Another SJP customer, decided to go elsewhere because he was unimpressed by the performance of his pension. He was shocked to learn that he would have to pay nearly £20,000 to switch, because unlike most financial advisers SJP charges a fee of up to 6% if clients want to switch or withdraw money from their pots within six years of becoming a customer. Worse, if a client adds money to their savings, the six-year clock is reset on that portion of their fund.
How does SJP work?
The firm has a unique charging model. It works with about 3,000 sales advisers, whom it calls “partners”, who are “restricted” — meaning that, unlike independent advisers, they cannot recommend any of the 2,000-plus other funds on the market which aren’t on their panel.
They disclose SJP’s charges only at face-to-face meetings. Clients signing up to non-pension funds, such as Isas, pay an upfront charge of 5% of what they are investing to cover advice and other costs. Every time they contribute more money, SJP pays the adviser another 5%.
Pension customers, do not pay the upfront charge but are instead liable for the exit fee.
The government will cap pension exit penalties at 1% from March 31, to help people using new pension freedoms from the age of 55. But SJP’s exit charge is levied regardless of age, so the cap will not apply to its customers.
SJP said: “All SJP clients are clearly made aware of charges before becoming a client.”