Early exit charges for pensions capped at 1%
18 November 2016
Early exit charges for existing occupational pensions are to be capped at 1% and any new contracts will be capped at 0%.
Geographical extent – This change applies to England, Scotland and Wales (GB). Northern Ireland governs their own legislation in relation to pensions.
Currently people can face average early exit charges of around 5% of their pension pot simply for cashing in their own savings.
Plans have been announced by the Minister for Pensions to create exit charges equality for occupational pensions to ensure people are not unfairly penalised for accessing their savings early.
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.
The cap will be regulated by The Pensions Regulator (TPR) mirroring the work of the Financial Conduct Authority (FCA) for personal and stakeholder pensions.
Read the government response to the consultation on capping early exit charges for members of occupational pension schemes (published 15 November 2016).
The government will consult on the regulations in early 2017, with the cap set to come into force in October 2017.