Regulator warns on poor-value legacy pensions: what it means for retirement income

What the review found

The review covers unit-linked non-workplace pension and savings contracts — the kind of policies many people took out in the 1980s, 1990s and early 2000s through employers, IFAs, or directly from insurers. These older products can carry layered charging structures — provider charge, platform charge, fund charge — that accumulated at a time when the industry operated differently. Newer products typically have simpler, lower-cost designs.

The review found that some customers in these older products are receiving worse outcomes than those in newer arrangements. Providers have been told to identify poor value proactively and take action — whether by reducing charges, moving customers to better-value products, or improving the data they hold on their own customers’ outcomes.

The “double-dipping” crackdown

A related finding in the review concerns cash holdings within pension products. Some providers have been charging customers a fee for holding cash within their pension, while also keeping the interest earned on that cash for themselves rather than passing it on to the customer. The regulator has moved to stop this practice, describing it as incompatible with fair value requirements.

For customers with significant cash balances inside a pension or investment wrapper, this change — once implemented — should mean that interest earned on that cash is passed through rather than retained.

What this means in practice for over-55s

The most straightforward takeaway is: if you have an older pension policy — one you took out more than a decade ago and may not have actively reviewed since — this review is a prompt to check what charges you are paying and whether a newer arrangement might offer better value. Your pension provider is required to provide this information on request.

For homeowners in or approaching retirement, a pension review is also a natural moment to take stock of the full retirement income picture. Pension savings are one source of retirement income; the State Pension is another; savings and investments are a third. For homeowners, property equity is a fourth — often the largest, and often the least explicitly planned for.

If a pension is delivering less than it should due to outdated charges, that does not mean retirement income is necessarily at risk. It does mean that other assets — including property — may carry more of the weight than originally expected. Understanding the full picture is a useful thing to do regardless of what any review finds.