Chancellor considers cap on pension exit fees
19 Jun 2015
Chancellor George Osborne has said that the Government will consider putting a cap on early exit penalties for people wishing to withdraw money from their pension savings, following complaints about providers charging ‘excessive’ fees. Mr Osborne announced that the Treasury would investigate fees as part of a consultation starting next month.
New pension rules introduced in April allow people over 55 to withdraw cash from their pension savings, but since not all pension companies are allowing partial cash withdrawals a significant number of savers have been looking to switch providers. The consultation will examine the costs, speed and ease of transferring to a new pension company.
Speaking in the House of Commons, Mr Osborne said: "There are clearly concerns that some companies are not doing their part to make [pension] freedoms available. We are investigating how to remove barriers and we are considering now a cap on charges."
However, the Association of British Insurers (ABI), speaking on behalf of the pension provider industry, claimed that nearly 90% of customers eligible for withdrawing cash from their pension pot would not face early exit fees, and that the fees that were being charged reflected expenses already paid by the provider in setting up the policy.
Responding to the Chancellor’s comments, Huw Evans, director general of the ABI said: "We agree that further clarity is needed and have been calling for it for some time. But we reject any suggestions that the industry is putting up unnecessary obstacles to hinder customers exercising their pension options.”