The government has confirmed a cap on excessive exit charges for those accessing their pension pot early.
On 19 January, chancellor George Osborne outlined a proposal to place a duty on the Financial Conduct Authority (FCA) to cap excessive early exit penalties.
The FCA will be responsible for setting the level of the cap, which it will consult on in due course.
The duty will be introduced through legislation, and will form part of the government’s response to its consultation on pension transfers and exit charges.
The consultation, which ran between July and October 2015, sought responses on capping early exit penalties for those eligible to access the pension freedoms, ways to improve the process of transferring between pension schemes, and clarity around financial advice.
Osborne (pictured) said: “The pension freedoms we’ve introduced have been widely welcomed, but we know that nearly 700,000 people who are eligible face some sort of early exit charge. 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 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.
“The new duty, introduced through legislation, will form part of the response to the government’s pension transfers and exit charges consultation, and will help people take full advantage of the new flexibilities.”
Tom McPhail, head of retirement policy at Hargreaves Lansdown, said: “We welcome this announcement; hundreds of thousands of pension investors currently face charges and restrictions if they want access to the pension freedoms or to transfer their money to a new pension arrangement.
“In some cases these penalties can run to hundreds or even thousands of pounds. This kind of financial bondage has no place in the twenty-first century.”