The City watchdog has announces its final rules on capping early exit charges for pensions.
The Financial Conduct Authority (FCA) said today that from 31 March next year, early exit charges will be capped at one per cent of the value of existing contract-based personal pensions, including workplace personal pensions.
Early exit charges that are currently set at less than one per cent can't be increased, and the FCA said firms won't be able to apply an early exit charge to personal pension contracts entered into after these rules take effect.
The rules match proposals delivered by the regulator earlier this year.
“People eligible for the government’s pension reforms should feel able to access them as they wish," said Christopher Woolard, executive director of strategy and competition at the FCA.
"The one per cent cap on early exit charges for existing pensions, and the 0 per cent cap for new contracts, will mean that current and future savers will not be deterred by these charges from accessing their pension pots.”
Citizens Advice has previously hit out at the FCA's proposed cap for being too high. The charity has pushed for a standard £50 exit fee to be applied instead.
The watchdog was forced to look more closely at pension exit fees after pension freedoms were brought in allowing policyholders to withdraw their entire retirement savings pot rather than purchasing another product such as an annuity.