It seems today that if there is a problem with pensions or if people are looking for someone to blame for people losing money, then SIPPs seem to be at the front of the line. This is despite the fact that SIPPs are often not to blame and the most recent consultation paper from the FCA, on early exit penalties, is a case in point. SIPPs in most cases are modern products that move with the times, they were the first to offer increased pension freedoms and to adopt clean charging structures. They are generally quick to move with the times, unlike historical large occupational schemes.

The FCA consultation paper on early exit penalties is definitely focused at historical products which have a built in retirement date, unlike SIPPs where generally you can change it at any time as long as it remains within legislative parameters. This means that there isn’t usually a charge for taking benefits early, as there is no ‘early’ in the SIPP world.

Although I welcome the restriction on early exit penalties because it will give investors greater freedom to access their benefits in a way that may be more appropriate to their circumstance, I don’t think it has gone far enough.

I feel that they should cover exit penalties on transfers between schemes before age 55, many savers are trapped in either poorly performing or poorly administered schemes because the cost of transfer is too great to justify. So they have to suffer the hit or suffer the poor service levels.

As most of you will know, I don’t necessarily agree with the bad press that pension providers have received with regards to not being able to offer all the pensions freedoms to their members. I understand that there are implications for older schemes and their administration systems which prevent them from doing this and historically all schemes haven’t been expected to offer all the options.

However, I feel that there is more that can be done to help people who are trapped in schemes with high exit penalties (even before age 55) who are unable to access all the death benefit options. It is perfectly understandable that a scheme that can’t offer drawdown in life can’t offer it at the point of death, but the Government could easily solve this by allowing transfers at the point of death and designation into a different scheme, this is clearly possible when you are buying an annuity with another provider but not for drawdown.

This issue is causing investors to transfer sooner rather than later in order to give their beneficiaries all the options available and as the early exit penalty rules don’t cover transfers before age 55, there is a danger they will be hit by a significant charge for this.

There is clearly more work the FCA has to do on this and looking deeper into the issues that impact on everyone not just those coming up to retirement is key.

Claire Trott, Head of Pensions Technical, Talbot and Muir