Hold back before tapping your pension savings

We've just seen yet another change to pensions rules, this time to plug more of the gaps holding back some savers from taking full advantage of the pensions freedom rules introduced last April. Last week, Chancellor George Osborne announced that the financial regulator the Financial Conduct Authority (FCA) would cap "rip-off" exit fees charged on those shifting pension schemes, which make it impractical for savers to access their pension before its agreed maturity date.

"We're determined that people who have done the right thing and saved responsibly are able to access their pensions fairly," says Osborne. "The government isn't prepared to stand by and see people either ripped off or blocked from accessing their own money by excessive charges."

According to the Financial Times, the FCA found that around 16% roughly 700,000 of those over-55s eligible to access their pensions flexibly face an early exit charge. Some 358,000 faced charges of up to 2%; about 165,000 could expect to pay from 2% to 5%; 81,000 could get charged 5%-10%; and 66,000 would be slapped with ludicrously high exit fees of more than 10%.

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The majority of providers stopped offering these types of policies in 2000, although a few continued selling the old-fashioned products right through to 2012. Research conducted by The Daily Telegraph last April found that about 7% of Standard Life's pension plans still had exit penalties attached, rising to 13% for those held by the over-55s. About 7% of policies drawn up by Old Mutual charged exit fees. Phoenix says 10% of its policies are affected, and Zurich 20%.

If you're unsure whether the changes will affect you, check your policy details, particularly if you have a pre-agreed retirement date. In general, the older the policy, the more likely it is to demand early exit fees. The next step is to write to your pension provider to request the current value of your pension pot and its "transfer value". This latter figure will tell you exactly how much you'll have left after all penalties have been applied.

If you are affected, the good news is that change is on its way. However, it's unclear exactly how long it will take to arrive on the scene. Experts have suggested that the new rule may not come into force for at least six months from now, as the FCA deliberates and consults over exactly where to set the fee cap. It has previously been suggested that this is likely to be pitched at roughly 2.5% of your entire pension pot. If you're keen to access your pension, you may be best to hold back until we know more.