Fees: £900 million of savers’ cash is snared in pensions with charges of over 3 per cent
When Paul Walton was made redundant earlier this year, he decided it was time to spring-clean his finances.
Digging through the paperwork and bank statements for his pensions and savings, he worked out he had £80,000 set aside for retirement from his 30-year career as an engineering machinist.
This included a £1,300 pension pot squirrelled away with wealth management firm St James’s Place from a job the 49-year-old held for a few years in the late Nineties and early Noughties.
Paul, who lives in Rotherham, South Yorkshire, with his wife Tammy, 45, hadn’t paid any more into the pension since he left the company in 2001.
He’d hoped that the fund’s investment growth in the past 15 years would have turned his pot into a tidy sum.
In August, Paul rang St James’s Place to find out how much the fund was worth and received a horrifying reply: there was nothing left.
Every penny had been eaten up in eye-watering charges levied by the company over the years.
The call centre worker who had put him on hold while she double-checked the details with a colleague then broke some even more astonishing news.
Rather than a pot of cash waiting for his retirement, Paul was told he actually owed St James’s Place £37.32 for maintaining the fund.
The firm said as a goodwill gesture it would waive this fee — but that still left Paul without the £1,300 paid in to the fund.
‘I was in complete shock,’ says Paul. ‘My jaw dropped to the floor when they told me I actually needed to pay them money.
‘I know pensions can rise and fall in line with the stock market, but I would never have thought for a moment that there would be nothing left after all those years.
‘It’s not a lot of money, but every penny will count in my retirement.’
Paul was particularly surprised because around 14 years earlier he’d contacted St James’s Place and asked to transfer the fund into another pension.
He thought it would have been cheaper and easier for him to keep an eye on the fund, but St James’s Place persuaded him otherwise.
It sent a letter asking him to stick with the huge wealth manager, which is one of Britain’s 100 biggest firms and manages £66 billion for thousands of customers. It even said the charges on the account were unlikely to cause him problems.
Paul Walton was shocked to discover that the £1,300 he had paid into a pension fund had been entirely swallowed up by charges
The letter said: ‘Assuming that the fund continues to grow as it has in the past, you can obviously look forward to enhanced fund values in the future.’
St James’s Place added that it expected it was ‘likely’ Paul would keep his fund invested with the firm.
Paul was convinced by the letter, signed by an adviser who boasted an impressive string of qualifications.
Over the years he admits he put the fund to the back of his mind, thinking it would be ticking over nicely.
It didn’t help that Paul says St James’s Place failed to send him annual statements on the fund — despite him living at the same address during the whole time.
‘I took St James’s Place’s word the fund would be all right. I don’t know a lot about pensions and they seemed to be the experts,’ he says.
But a web of six different charges had eaten away at his pot until there was nothing left. How much Paul paid in fees varied each year, but documents seen by Money Mail show that in one year he handed over as much as £130.
These included annual management investment charges as well as fees for maintaining his fund.
After Money Mail intervened, St James’s Place reviewed Paul’s case.
The firm found the adviser who wrote to Paul failed to provide him with enough information to ‘make an informed decision’ about whether to leave his pension with the firm.
It offered Paul £2,350 in compensation, reflecting how it predicted his fund would have grown if he had not been charged some of the fees.
Since last year, workers being signed up to pensions by their employers can be charged only a maximum of 0.75 per cent a year in fees.
But hundreds of thousands of workers have old, high-charging pensions with a host of firms.
Many of these deals were flogged by salesmen who travelled door-to-door or visited workplaces representing insurers, wealth managers or investment companies.
In 2014, a study by the Independent Project Board, which works alongside the Financial Conduct Authority, found £900 million of savers’ cash is snared in pensions with charges of over 3 per cent.
Around 70 per cent of this money belongs to savers who, like Paul, have pots of less than £10,000.
Justin Modray, founder of advice firm Candid Money, says: ‘These kind of high fees are inexcusable. It is unfair for firms to cream off cash from customers like this.’
A St James’s Place spokesman says the pension should have been transferred when Paul left his job, but due to a ‘misunderstanding’ this did not happen.
‘The small fund was left invested and eroded by the on-going member charge, a situation we ensure no longer happens when members leave their scheme,’ he says.
‘When we were made aware of the case, we reviewed the situation and were concerned to find that Mr Walton had not been given sufficient information regarding his options on leaving employment.
‘We will review our procedures to ensure this is an isolated case.’