An end to pension exit fees

The UK financial watchdog is set to crackdown on early exit fees, which charge investors who want to cash in their pensions before a set retirement age.

The UK financial watchdog is set to crackdown on early exit fees, which charge investors who want to cash in their pensions before a set retirement age. The move follows Chancellor George Osborne's pledge to tackle the "rip-off" charges levied on those aged 55 and over who want to make use of the pensions freedom rules he introduced in April 2015.

Last week the Financial Conduct Authority (FCA) announced that so-called "exit charges" will be capped for people with contract-based personal pensions, including workplace pensions. The cap, which will stand at 1% of the value of a member's pension pot, will come into force from 31 March 2017. Meanwhile, providers will also be banned from increasing the exit fees on existing policies if they are already below the proposed 1% cap. On top of that, any new pension scheme set up after the new rule comes into force from next year will be banned from charging an exit fee at all.

Data collected by the FCA show that around 700,000 customers in contract-based pension schemes could face some sort of early exit charge when they want to access their pension savings before their specified retirement date. Some 358,000 faced charges below 2%, while 66,000 faced charges of an incredible 10% or more of the value of their pension pot. The FCA's consultation runs until 18 August, during which time it will consult consumers and the pension industry on its proposal.

The government also announced last week that it intends to cap charges for millions of savers in "trust-based" workplace pension schemes, such as master trusts, which are overseen by the Pensions Regulator, not the FCA.

Recommended

Government consults on small pensions pots - here’s what to do if you have several small pension pots
Pensions

Government consults on small pensions pots - here’s what to do if you have several small pension pots

The Department for Work and Pensions has started consulting on helping workers who hold a number of small pension pots. We look at how the government …
30 Jan 2023
Equity release v downsizing – which is best?
Personal finance

Equity release v downsizing – which is best?

Equity release hit a record high in 2022. But is downsizing a better way to hold on to your money?
27 Jan 2023
Is the State Pension triple lock doomed to fail?
Pensions

Is the State Pension triple lock doomed to fail?

The State Pension triple lock guarantees an increase in the state pension every year, but this assumes government income grows every year as well, whi…
25 Jan 2023
Pension contributions: what you need to declare on your tax return
Personal finance

Pension contributions: what you need to declare on your tax return

Make sure you don't forget to declare your pension contributions in your tax return
12 Jan 2023

Most Popular

When will interest rates go up?
UK Economy

When will interest rates go up?

New interest rates will be announced today (2 February) – we look at what to expect.
2 Feb 2023
Top 10 areas most immune to a house price crash
House prices

Top 10 areas most immune to a house price crash

New research pinpoints the towns, cities and London boroughs most insulated from house price falls this year - and which are the most exposed.
31 Jan 2023
February’s Premium Bond millionaire winners revealed – how to check if you’ve won
Personal finance

February’s Premium Bond millionaire winners revealed – how to check if you’ve won

This month will see the 500th premium bond holder celebrate winning the million pound jackpot in this month’s draw. We explain how to check if you’re …
1 Feb 2023