The consultation on pension transfers and early exit charges ran for 12 weeks, closing in October 2015. It looked at a number of issues identified as preventing individuals from accessing flexible pension reforms, including early exit charges,  ways of making the process for transferring pensions from one scheme to smoother and more efficient; and how to ensure that there was greater clarity around the circumstances in which someone should seek financial advice.

Data collected by the Financial Conduct Authority (FCA) found that 84% of those eligible to access the freedoms did not face an early exit charge. However, the data showed that 358,000 (9%) would face early charges of between 0% and 2%, 165,000 (4%) would face a charge of 2% to 5% and 147,000 (around 3-4%) would face a charge of 5% or more.

For trust-based schemes, a survey by the Pensions Regulator (TPR) suggested that 11% of schemes surveyed had some form of charges for individuals exiting their pension, while around 3% of scheme members would face early exit charges.

In its response, the Treasury confirmed that the government will introduce legislation in the Bank of England and Financial Services Bill to amend the Financial Services and Markets Act 2000 (FSMA), as outlined last month.

This amendment will give the FCA a duty to make rules requiring relevant firms to limit the early exit charges imposed in relation to contract-based schemes, at a rate (or rates) set by the FCA, following further cost-benefit analysis in relation to the appropriate level of any cap. This will allow the FCA to set the level of any cap in line with their consumer protection and competition objectives, the Treasury argued.

The FCA is due to set out its next steps in this process shortly with a view to implementing its duty to cap early exit charges before the end of March 2017.

The government is currently considering how to mirror these requirements for trust-based schemes.

Evidence gathered alongside the consultation revealed that for the majority of individuals transferring between FCA-regulated contract-based pensions schemes, transfer times were relatively quick (16 days on average). However, data from TPR showed that the average transfer time for trust-based pensions was much longer (39 days), and many consumer survey respondents said that they had to wait significantly longer for individual transfers.

A majority of respondents to the consultation also said they were aware that some receiving schemes were refusing to accept the transfers of small pots, and/or imposing additional advice requirements beyond the statutory requirements.

The outcome document states TPR will introduce new guidance for scheme trustees to help ensure transfers are processed promptly and accurately. The government will make trust-based pension schemes more transparent and accountable for their performance in processing transfers through a new reporting regime; and Pension Wise will develop additional guidance on pension transfers in order to support individuals through the transfer process.

Alongside this, the government will also create a new regulatory requirement for TPR regulated pension schemes to report on an ongoing basis how they are performing in processing transfers, including against possible benchmarks and new transfer targets.

TPR is charged with working with the pensions industry over the coming months in order to bring a package of measures into force in summer 2016. However, the Treasury has turned down the idea of creating a ‘whitelist’ of approved pension providers, an option favoured by many respondents, on the grounds such a move would require a rigorous quality assurance process and also regular monitoring.

The consultation’s other area of concern, regarding the accessibility and affordability of financial advice, is now to be considered as part of the Financial Advice Market Review (FAMR) – a joint review by the Treasury and the FCA announced after the pensions consultation started.

Harriett Baldwin, economic secretary to the Treasury, said: ‘It is only fair that people are able to access their pensions flexibly, without facing any unjustifiable barriers. That’s why we’re taking action to curb excessive exit charges, make transfers easier and ensure people have the information they need to make informed decisions.’

Details of the original consultation, which closed in October 2015 are here 

Responses to the consultation are here