Pensions minister Ros Altmann has confirmed the Government will impose a cap on exit penalties levied on members of trust-based schemes.
Yesterday the Treasury announced it will giving the FCA a duty to set a cap on “excessive” charges where customers leave pension products early. However, until now it has not been clear whether the same limit will be placed on trust-based providers.
Altmann tweeted: “Will ensure cap on exit penalties in trust-based pensions alongside FCA cap for contract-based. Want all pension savers helped the same.”
A DWP spokeswoman adds: “The Government is clear that all consumers, regardless of the type of scheme that they are in, should be protected from excessive early exit fees.”
What is meant by “excessive” is yet to be decided and the regulator will launch a consultation to determine at what level the cap should be set. The FCA found 670,000 consumers aged 55 or over faced some level of early exit charge.
Of these, 358,000 faced charges of up to 2 per cent; 165,000 faced charges of between 2 per cent and 5 per cent; 81,000 faced charges between 5 per cent and 10 per cent; and 66,000 faced charges above 10 per cent.
Osborne’s announcement has met with fierce criticism from some in the industry who warn the move undermines contract law.
Platforms have also come under pressure to scrap their exit fees.