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Pension exit charges to be capped

Consultation shows that over 66,000 savers face exit changes of more than ten per cent of their savings

20 January 2016

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Early exit charges levied against savers who access their pension pots will be capped to encourage a greater number of people to access their money.

George Osborne has placed the Financial Conduct Authority in charge of setting and enforcing the cap, which will be enshrined in law.

A government consultation recently revealed that nearly 700,000 people in 'contract-based schemes' could face charges when utilising their right to access their savings, which are thought to have stopped many from encashing their pension.

The chancellor told the commons: 'The government isn't prepared to stand by and see people either ripped off or blocked from accessing their own money by excessive charges.

'We've listened to the concerns and the newspaper campaigns that have been run and today we're announcing that we will change the law to place a duty on the Financial Conduct Authority to cap excessive early exit charges for pension savers.'

Osborne continued: 'We're determined that people who've done the right thing and saved responsibly are able to access their pensions fairly.'

The pension freedoms have now been in force for less than 12 months but almost 400,000 people have accessed their pension pots.

The above consultation revealed that some 670,000 people faced early exit charges. Of these, 358,000 faced charges between zero-two per cent of their savings; 165 were subject to charges of two-five per cent; 81,000 faced charges of five-ten per cent; and 66,000 savers faced charges of more than ten per cent of their savings.

Further details on the level the cap will be set at and the timeline for implementation are expected to be included in the government's full response to the Pension Transfers and Exit Charges consultation.

 

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