No more sky high penalties
Savers who want to tap their pensions will no longer be hit with sky-high penalties as the regulator revealed this morning it would cap fees at one per cent.
The move could save around three-quarters of a million savers thousands of pounds towards their retirement.
Earlier this year Chancellor George Osborne pledged to change the law so savers using new freedoms to access their cash early would not be stung by the huge fees that could snatch up to 20 per cent of their nest eggs.
Today the Financial Conduct Authority revealed that the proposed cap would be set at one per cent of a saver’s pension pot.
Firms will not be able to apply any exit fee at all on contracts entered into after the new rules come into force.
The move could pave the way for millions of savers to take advantage of the pension reforms without getting stung.
New pension freedoms were announced last year to great fanfare, offering over-55s greater control over their retirement savings than ever before.
Until then, most people would have to convert their nest eggs upon retirement into an annuity – a product that guarantees an income for life.
Annuities have been falling out of favour as they are often poor value and allow little flexibility.
However plans to ditch annuities and allow savers to spend, invest or save their pension pots as they choose were thwarted by eye-watering exit fees imposed by firms that made taking advantage of the new freedoms prohibitively expensive for some.
The Chancellor and Prime Minister quickly announced that fees would be curbed, but said that it was not up to government but rather the financial regulator to determine the level of the cap.
Today 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.’
Consumer groups welcomed the news. Alex Neill, Which? Director of Policy and Campaigns, said: ‘It’s right that the FCA is bringing in this cap on pension exit fees. People shouldn’t be unfairly penalised for accessing their money.
Tags: penalties
This entry was posted by John on Tuesday, May 31st, 2016 at 8:12 pm and is filed under Pension news.
