Members of the Public Accounts Committee criticised pension providers on Wednesday for charging extra fees for emergency pension withdrawals on top of the regular administrative fees they are collecting every year.
In an effort to alleviate the economic impact from the COVID-19 pandemic, legislators amended the Pensions Law to allow for a six-month pension holiday and savers to withdraw up to $10,000, as well as 25% of the funds in excess of that amount, from their pension accounts.
MLA Chris Saunders criticised the extra fees, citing a case where a pension plan member was charged $150 to make the emergency withdrawal.
He said, “We have people who are hellbent on taking as much money out of people’s pockets and nickle and diming them for every cent that they have before they can take their money out.”
Amy Wolliston, the deputy director of the Department for Labour and Pensions, said she is aware that some, but not all, administrators are charging fees ranging from $25 to $100. Woolliston told the committee she had personally spoken to every pension provider about their fees for the emergency pension withdrawal and that she was not aware of anyone charging $150.
PAC chairman Ezzard Miller questioned on what grounds the plan administrators were allowed to charge a fee at all, given that there were no provisions made for extra fees in the latest amendment to the Pension Law.
He argued that the regular administration fee should cover the running of the fund, including withdrawals. Miller said in previous years pension plan providers had charged their “huge administration fees and they did nothing”.
Wolliston explained that Pension Law allows plan administrators to charge fees that are “reasonable”.
She noted that if the administrator does not charge an extra fee for making the withdrawal, the cost would be absorbed by the plan and paid by all plan members, including those who have not made a withdrawal.
Aside from absorbing the cost, “the most equitable thing to do would be to charge a fee”, she said, because otherwise the people who have chosen not to make a withdrawal will end up paying the cost of additional staff and whatever else was necessary for the withdrawals.
The sheer volume of requests has become an operational issue for the pension providers, she said, noting that, based on the latest set of statistics, there have been more than 20,000 approved applications.
No one could have anticipated a volume of that magnitude, Wolliston said. “In fairness to the administrators, it is a lot of work on their part, because they have all of that processing to do. That’s why the fee is being charged.”
However, she noted that her department was asking questions about fees to determine if they are reasonable or not. “We have probed, and that process is still ongoing,” she said.
In addition to the pension regulator, the Public Accounts Committee will be questioning representatives from all local pension providers about pension practices, including fees, performance and transparency.
The committee is meeting from Wednesday to Friday.