The Financial Conduct Authority (FCA) has announced its final rules on capping early exit charges for consumers eligible to access the government’s pension reforms from age 55, which will be set at 1% from next year
From 31 March 2017, early exit charges will be capped at 1% of the value of existing contract-based personal pensions, including workplace personal pensions. Early exit charges that are currently set at less than 1% may not be increased. Firms will not be able to apply an early exit charge to personal pension contracts entered into after these rules take effect.
Christopher Woolard, executive director of strategy and competition at the FCA said: ‘People eligible for the Government’s pension reforms should feel able to access them as they wish. The 1% cap on early exit charges for existing pensions, and the 0% cap for new contracts, will mean that current and future savers will not be deterred by these charges from accessing their pension pots.’
Responding to the move, Dr Yvonne Braun, director of policy, long-term savings and protection at the Association of British Insurers (ABI), said: ‘We note the 1% cap. The industry is strongly supportive of the pension freedoms and has worked hard to make them a success.
More than eight out of 10 customers are unaffected by early exit charges. Where they do apply, most fees are 2% or less and would have been put in place many years ago.’
