Is this exit penalty fair?

By THIS IS MONEY
Updated:

 

I would like to transfer my pension from Abbey Life. Its value is £14,000 but Abbey Life want to take £4,128 as an exit penalty. Surely this cannot be right, it seems totally unfair. Please help. CM, Chorley, Lancs

Tom McPhail, head of pensions research at financial adviser Hargreaves Lansdown, replies:

Fair it may not be, but they may well be within their rights to impose such a penalty. Pension plans set up before the late 1990s tended to have heavy penalties built in to them, so if you want to transfer away, or even stop contributing, the pension companies very often do have a contractual right to penalise you on the way out.

It would be worth asking them to explain exactly how they arrived at such a hefty penalty, and if they are prepared to reduce or waive the fee. You could also go back to the financial adviser who set up the pension for you and ask them if they can do anything to help.

Your only other options are to pursue a mis-selling case against whoever sold you the pension, but this will only work if you have clear documentary evidence that at the time you started the plan, you requested a pension which would allow you to make a transfer: Or you could simply not transfer the money.

This last option depends on why you want to transfer - if it is to get access to alternative investment funds, then possibly the Abbey pension could give you this, without having to pay the penalty.

Most watched Money videos