You may have heard of the many pension scams around, but few people are aware of the poor-performing pension funds
with extortionate fees and exit charges – especially for overseas expats.
Industry experts expect the Financial Conduct Authority (FCA) to investigate the many firms who are routinely charging eye-watering fees and exit fees on pension savers – some cited as much as 25%.
The FCA will examine the returns from funds, many of which carry layers of punitive charges and have typically underperformed the funds which charge normal pension fees.
As cheaper, more flexible products are rolled out to new customers, the FCA are concerned that those in pensions sold over the last 10-15 years have been getting a raw deal with poor returns and sky-high charges.
Overseas clients saddled with highest charges
Thousands of expats could be trapped in poor-value pension funds as a result of dubious legacy selling practices by firms that impose hefty reductions when clients wish to transfer.
However, it’s not only the transfer fees which will come under scrutiny – some pension funds come with annual fees well over what is acceptable today and thousands of expats may be affected.
Some clients are even being told by some firms that there are no fees or commissions as they get paid by the pension provider. This is in fact not true as the pension provider takes money from the client’s fund to pay the firm.
It’s a widely held view by industry leaders that someone in a modern pension should be paying around a modest 1% annual charge and firms should be treating their clients fairly, reviewing all aspects of their product including fees and performance.
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