The government is planning action to ensure pension scheme members accessing the pension freedoms are not charged excessive early exit fees.
It will launch a consultation in July to ensure penalties are kept to a minimum and scheme members are treated fairly when moving their pension to a provider that offers them flexible options to access their savings.
So far, 60,000 people have taken advantage of the pension flexibilities, which have been in place since April 2015.
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There have been concerns that some providers are not offering scheme members the full range of freedoms.
The consultation will look at:
- Options to address any excessive early exit penalties. If there is evidence of such penalties, these include the option of imposing a legislative cap on these charges for those aged 55 or over.
- Making the process for transferring pensions from one scheme to another quicker and smoother, to help people make use of the new freedoms.
The government has written to the Financial Conduct Authority (FCA), confirming that the FCA will, in tandem with the government’s consultation, gather information from pension providers to understand the scale of the problems facing individuals who want to transfer to a different pension provider.
Chancellor George Osborne said: “The pensions freedom we introduced in April deliver a fundamental principle that people who have worked hard and saved hard all their lives should be trusted with their money, 60,000 have already accessed their pension savings.
“But there are clearly concerns that some [pension providers] are not doing their part to make those freedoms available.
“We are investigating how to remove barriers, are now considering a cap on charges, and are asking the FCA to investigate so people who have worked hard and saved hard deserve a better deal.”
In a statement the Treasury added: “[The] Treasury will consult to ensure that people are not charged excessive early exit penalties.
“The government has already strengthened the right to transfer to a new pension scheme but is clear that it wants all individuals to be able to transfer their pension easily, within a reasonable timeframe and at reasonable cost, so that they can take full advantage of the new flexibilities.”
Responding to the government’s announcement, Huw Evans, director general of the Association of British Insurers (ABI), said: ”With so many issues unresolved due to its rushed timetable, it is not surprising that the government has had to announce this consultation.
”Despite the lack of some crucial detail, insurers are continuing to work flat out to help customers on the basis of laws and regulations so far in place.
“We agree that further clarity is needed and have been calling for it for some time. But we reject any suggestions that the industry is putting up unnecessary obstacles to hinder customers exercising their pension options.”
The ABI notes that almost nine in ten of those eligible for pension freedoms will not face an early exit fee. Evans added: ”Where one is charged it is not a penalty for leaving early, but to cover the costs of setting up the pension, particularly commission.”