Chancellor George Osborne has today announced that a limit on the amount that people can be charged for accessing their pension pot early will soon be introduced.
Speaking in the House of Commons, Osborne said that nearly 700,000 of those who were eligible to use the pension freedoms rules, which came into effect in April last year, to gain access to their lifetime savings faced some sort of early exit fee for doing so.
"We’re determined that people who’ve done the right thing and saved responsibly are able to access their pensions fairly," Osborne said.
The move is part of government's response to a consultation on pension transfers and early exit charges, which ran from July 2015 until October 2015. A formal response to the consultation is expected soon.
The Financial Conduct Authority (FCA) will be responsible for setting the level of the cap and consultation on this is expected to take place shortly.
"The capping of early access charges is welcome news for consumers and will support the Government’s policy of giving individuals a greater sense of control over their pensions," explained Carolyn Saunders, head of pensions at law firm Pinsent Masons. "But for providers, this represents yet another change to the terms of their relationships with their consumers.
"Although not as radical as the adjustments resulting from the introduction of the pensions freedoms, it is another step along the road to making the private provision of pension products more like a public service."
Meanwhile, Dr Yvonne Braun, director, long term savings policy at the Association of British Insurers (ABI), remarked:
"As the FCA acknowledge, more than eight out of ten customers do not have to pay early exit charges to access their pensions. Where they do, most fees are below 5 per cent and were put in place decades before the freedom and choice reforms were introduced. We will engage closely with the FCA and Treasury on this issue going forward."