The FCA has proposed introducing a 1% exit charge cap for existing contract-based and workplace personal pensions.
The regulator today released a consultation paper that also proposed a ban on exit fees for personal pension contracts entered into after the cap come into force.
FCA strategy and competition director Christopher Woolard says: “Together with the ban on exit fees in future contracts, we are proposing a 1% cap on exit charges in existing contracts to ensure people can access their pension pots without being deterred by charges. This is an important step so people feel able to access their pension savings should they wish to.”
The FCA will be given both the power and duty to cap exit fees by parliament once the relevant section in the Bank of England and Financial Services Act 2016 comes into force.
The Department for Work and Pensions will also today announce its 12-week consultation “Capping early exit charges for members of occupational pension schemes”.
In March, Scottish Widows said it was removing exit fees from all of its workplace pensions. In the same month, Aviva, Old Mutual Wealth and Standard Life announced they would cap exit fees for individual and workplace pensions at 5 per cent.
Hargreaves Lansdown retirement policy head Tom McPhail says the proposed 1% cap does not go far enough.
McPhail says: “The fee should be capped at 0% and this would benefit a further 150,000 investors. A 1% cap is something of a victory for corporate vested interests. We hope that the cap can be brought up to a zero tolerance of exit barriers in due course.”
He adds: “The cap also only applies to those exercising the pension freedoms. Those wishing to transfer old, expensive private pensions to improve their value for money, while they are still building their savings, will not benefit from the cap. This penalises those who are doing the right thing by saving but are hamstrung from making competitive choices which would help their hard earned money work much harder.”
“Investors may also have to wait until March 2017. We are writing to FCA today for confirmation that anyone wishing to transfer from today’s date can have a guarantee that they can reclaim any charges – we want the ban to start immediately.”