Scottish Widows is removing exit fees across all of its workplace pensions ahead of Government moves to cap penalties when customers leave policies early.
In January George Osborne handed the FCA a duty to cap “excessive” exit fees. The level of the cap has not yet been set but Scottish Widows says it will scrap all penalties so customers can switch to another product or provider without incurring charges.
The move does not apply to individual personal pensions but the provider says it is considering expanding the ban.
The firm is aiming to apply the changes to 98 per cent of the corporate pensions book by 2016, with the remaining cases completed by the middle of 2017.
It says: “The full rollout of the project involves significant alterations to IT systems and will take 18 months to complete.”
Last week Money Marketing revealed several providers are planning changes to legacy pension products as a result of the charge cap and work done by Independence Governance Committees.
Scottish Widows head of industry development Pete Glancy says: “We believe more can be done to make the pensions market work better for customers and the removal of exit fees is a key milestone in helping to achieve this goal.
“These fees are largely associated with older style products, typically sold before 2001, and reflect expenses already paid by a provider in setting up the policy, which would normally be paid back if the saver stayed in the scheme to their retirement date. But with pension freedoms enabling people to access their money earlier than they had originally expected, we believe these fees place an unnecessary barrier on those wishing to take their money or move to a more modern product either with us or another provider.
“We are giving customers more choice by removing all exit fees. Those who value the benefits available in these older-style pensions can choose to remain in the scheme and those who feel they would be better placed in a more modern product with us or with anyone else will be able to move without penalty.”