Exit fees on pensions capped

Exit fees on pensions capped

There's been a lot of shake-ups with pensions recently, and generally, the whole thing has been deemed far too confusing.

Well, one bit of good news is that those who want access to their pensions will no longer be hit with huge penalties.

The Financial Conduct Authority has said that the proposed cap is going to be set at 1% of a saver's pension pot, which could save hundreds of thousands of people huge sums for their retirement.

Now, companies won't be able to dish out any exit fee on contracts that have been entered after these new rules come into force.

Until recently, annuities have not been very flexible, and often offer poor value. Huge fees were being imposed, meaning that a lot of people could not enjoy the benefits of a flexible annuity.

An FCA investigation last year, showed that 1 in 6 over-55s were looking at being hit with exit charges of up to £5,000.

Even those who looked to move to another, more flexible product with the same business were looking at getting heavily penalised.

Christopher Woolard, director of strategy and competition at the FCA, said: "Together with the ban on exit fees in future contracts, we are proposing a one per cent cap on exit charges in existing contracts to ensure people can access their pension pots without being deterred by charges."

"This is an important step so people feel able to access their pension savings should they wish to."

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