The Financial Conduct Authority (FCA) has today announced the level at which it will consult to cap early exit charges for those consumers wishing to make use of the pension freedoms.
The FCA has proposed that for existing contract-based personal pensions, including workplace personal pensions, exit charges will be capped at 1% of the value of a member’s pot. Firms will not be able to apply any exit charge for personal pension contracts entered into after the proposed new rules come into force.
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 1% 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.'
The FCA will be given both the power and duty to cap exit fees by Parliament once the relevant section in the Bank of England and Financial Services Act 2016 comes into force. This aims to ensure that consumers can access the government's pension reforms easily and affordably.
Separately, the Department for Work and Pensions will today announce its consultation 'Capping early exit charges for members of occupational pension schemes' which will be available later and run for a period of 12 weeks.
Notes for editors
- Consultation paper CP16/15: capping early exit pension charges[1]
- HM Treasury announcement on early exit charges[2]
- The new cap is not related to the recent review of the fair treatment of longstanding customers. The duty placed on the FCA by HMT is focused solely on exit charges for customers accessing their pension freedoms.
- On 1 April 2013 the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA)
- The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers, to protect and enhance the integrity of the UK financial system and to promote effective competition in the interests of consumers
- Find out more information about the FCA[3]