New plans to bring in a cap on early exit charges for occupational pensions have been announced by the Minister for Pensions today.
They will ensure that people are not unfairly penalised for accessing their savings early.
Currently people can face average early exit charges of around 5% of their pension pot simply for cashing in their own savings.
The cap will be set at 1% for existing occupational pensions and 0% for any new contracts, removing unnecessary barriers for those wanting to access their savings. This will bring exit charges for workplace pensions in line with other personal and stakeholder pensions.
Minister for Pensions, Richard Harrington, said:
We are restoring fairness and creating a level playing field in a system that has favoured the interests of providers over consumers for too long.
This new cap will protect people’s savings from excessive charges, so more of their money will go towards the comfortable retirement they have saved for.
The cap on occupational pensions, will be regulated by The Pensions Regulator (TPR), mirroring the work of the Financial Conduct Authority (FCA) for personal and stakeholder pensions.
Executive Director for Regulatory Policy at The Pensions Regulator, Andrew Warwick-Thompson, said:
We welcome the Department for Work and Pensions’ announcement today to implement a cap on early exit charges for occupational pensions.
It is important that there should be a level playing field between trust and contract based pension schemes. This is another important step in helping to ensure the best possible outcomes for savers.
Read the government response to the consultation on capping early exit charges for members of occupational pension schemes (published 15 November 2016).
Today the Financial Conduct Authority also announced it will cap early exit fees for personal and stakeholder pensions at the same level.
The government will consult on the regulations in early 2017, with the cap set to come into force in October 2017.
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