The Chancellor George Osborne today announced plans to introduce legislation to place a duty on the Financial Conduct Authority (FCA) to cap excessive early exit charges for those eligible to access their pension pot under the new pension freedoms.
The independent FCA will be responsible for setting the level of the cap and will consult fully in due course.” http://www.investegate.co.uk/hm-treasury/rns/statement-re-early-exit-charges/201601191147593213M/ Hargreaves Lansdown comment: Tom McPhail, Head of Retirement Policy “We welcome this announcement; hundreds of thousands of pension investors currently face charges and restrictions if they want access to the pension freedoms or to transfer their money to a new pension arrangement. In some cases these penalties can run to hundreds or even thousands of pounds. This kind of financial bondage has no place in the 21st century.”
“Investors who are looking to take advantage of the freedoms but who are currently facing exit penalties, may want to hold back now in order to benefit from the new ban, though it is unclear at this stage how rapidly the change can be introduced.”
The Treasury had originally proposed one of three options:
- A voluntary cap on exit charges
- A flexible cap in certain circumstances
- A cap on all early exit fees
Tom McPhail: “We hope that all pension investors will now be able to exercise free control over their pension pots. Any exit penalties should be limited to no more than a proportionate administration charge based on the actual costs incurred.”
FCA published the following research in late 2015:
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