Chancellor George Osborne has announced an end to “prohibitive” charges faced by those accessing their pension pots.
The Financial Conduct Authority (FCA) will have a duty to cap early exit charges deemed as excessive for those eligible to access their pension pots.
The change comes in response to the Pension Transfers and Exit Charges consultation where it was found that nearly 700,000 (16%) customers in contract-based schemes, who are able to access their pension, had the possibility of facing early exit charges.
FCA data showed that a significant minority of these people faced charges high enough to “effectively put them off accessing their pension freedoms.”
The FCA will be responsible for setting the level of the cap and will provide full consultation in the coming months.
Since the pension freedoms came into effect, 400,000 pension pots have been accessed with many providers offering customers a range of options to benefit their savings.
Chancellor George Osborne, said:
“We’ve listened to the concerns and the newspaper campaigns that have been run and today we’re announcing that we will change the law to place a duty on the Financial Conduct Authority to cap excessive early exit charges for pension savers.
“We’re determined that people who’ve done the right thing and saved responsibly are able to access their pensions fairly.”