£100,000 What John’s pension should be worth ... £3,000
What’s left after his shares were sold behind his back
A MAN who expected to retire with a pension pot worth £100,000 has been left with just £3,000 because his provider sold all his shares to cover unpaid fees — without his permission or knowledge.
Retired businessman John Eddom, 65, fears he will be left struggling in his old age after his nest egg was raided without him realising. His pot was worth £50,000 when he stopped saving in 2000 and if his investments had been left alone he would be sitting on a fund worth more than £100,000 today.
But without his knowledge, his pension company sold all his shares in 2005, raising £17,000 to pay the annual fees for his plan. John only found out late last year.
Money Mail research found most pension plans contain hidden small print that lets investment firms raid your retirement nest egg for unpaid fees.
Major firms including Aviva, Prudential and Hargreaves Lansdown include clauses in savers’ contracts that allow the company to sell your investments to claw back fees they are owed for managing funds. These draconian terms are usually enacted only as a last resort.
But when they are used, the clauses can deprive savers of lucrative returns. And in the most extreme cases, the practice can empty entire savings pots. Most at risk are workers who have stopped contributing to their pension or who have moved home without notifying their pension company.
In some cases, they may not realise their investments have been sold until it is too late.
John only discovered last year, just months away from retirement, that his pension firm Rowanmoor had sold his investments years earlier.
He had started saving into the plan in the early Eighties, when he was earning good money from his own haulage business, Eddom.
By 2000 his money was invested in shares such as Amazon, U.S. technology company Qualcomm and blue chips such as United Utilities.
He had stopped paying into the pension in the mid-Nineties when his haulage business ran into trouble, and decided to leave the money alone to give his investments a chance to grow.
However, he didn’t budget for the cost of the plan.
The pension, which was taken out with firm James Hay and later bought by Rowanmoor, was charging fees, which over the next 12 years were on average £1,365 a year. These were usually deducted from a cash fund in his portfolio. Typically, dividend income from his shares would be paid into this account. John could also top it up himself.
By 2005, this cash fund had run out. John had no idea because he hadn’t checked his pension and had moved to Valencia in Spain for a new start after the failure of his business. Rowanmoor says it tried to contact John when his cash fund ran low so he could pay the fees, but says it did not receive a reply. It says it also tried to contact John before it sold his shares — but again, did not receive a reply.
When John reached the age of 65 last year he received an email from his elderly parents.
Rowanmoor had sent a letter to his parents’ address as they were listed as his next of kin on the original pension documents.
The letter asked what John wanted to do with the money left in his fund, which annual charges had shrunk to £3,064.
It transpired that Rowanmoor had sold all his shares in 2005, including 75 in technology company Amazon. These would be worth £68,400 alone today.
By John’s calculations, his other shareholdings would have taken the overall value of his pension pot above £100,000.
Rowanmoor had left his savings in cash and taken the management fees averaging £1,365 a year.
John says he would have paid the fees from his own pocket if he’d known he owed money.
He says: ‘I was shocked and then really angry that they could do that without any contact with me, especially as I had waited so long for the stock markets to recover. It was done without my authorisation. If I’d known, I would have covered the fees.’
When John queried why so little was left, Rowanmoor told him it was within its rights ‘to encash the share portfolio . . . to meet the fees that were outstanding’.
John, who still lives in Spain and is married to Julie, 58, says his only other income comes from the British state pension.
‘This has a massive financial impact on me and my family,’ he says. ‘I have three young grandchildren in the UK and we were planning to use the money to make regular trips to see them. Now that’s not possible.’
He has lodged a complaint with the Financial Ombudsman Service.
Most major investment firms have similar small print. The terms and conditions of Aviva’s self- invested pension portfolio say all charges are initially taken from a saver’s cash fund. It adds: ‘ If there is an insufficient cash balance to pay any charges due we will automatically disinvest an amount to cover the charges by selling across your investments on a proportionate basis.’
Investment firm Hargreaves Lansdown says: ‘ We have the absolute right of sale of investments in your account to meet amounts you owe to us.’ Prudential’s Retirement Account says: ‘If the product charge cannot be taken due to insufficient funds it will be taken first using cash . . . or then by selling stocks and shares proportionally.’
Mike Barrett, director at The Lang Cat pensions consultancy, says: ‘Virtually all insurers have the right to sell your investment if there’s not enough cash to cover fees. A Rowanmoor spokesman says: ‘ Rowanmoor denies all wrongdoing in this matter. It is appropriate to let due process take its course before considering any comment on the matter.’
John Lawson, of Aviva, says: ‘ We have robust processes in place to warn customers of any fund depletion by charges.’ Hargreaves Lansdown says it would write to customers before selling their investments.
A spokesman adds: ‘It is only prudent for the customer to make sure they have the cash available to meet the fees which are due.’
A Prudential spokesman says cashing in shares is ‘normal practice across the investment sector’.