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Government begins consultation over pension exit fees


The government has today launched a consultation in regards to the issue of whether pension exit fees should be capped.

Even with the introduction of the new pension freedoms, some providers are making it very difficult, or even impossible, for consumers to withdraw their pension. People aged over 55 are facing excessive charges, and some firms have been charged up to 20% of the value of their pension pot to withdraw it.

The government will now consult to see if there should be an industry wide cap on exit fees. They will consider different options for firms that charge excessive fees to consumers, such as a cap on all excessive fees, a flexible cap that can be used in some circumstances and a voluntary approach to restricting exit fees and charges.

Prime Minister David Cameron said:
"We want to ensure that pension providers are not using exit charges and restrictions as a barrier to switching, just when the government is providing pensioners with greater freedoms."

Association of British Insurers, which represents most of the pension providers, believed that the industry was already working to solve problems in the industry. A spokesperson said:
"No pensions sold on the market today have early exit fees, and nearly nine out of 10 people making use of the pension freedoms will not face an early exit fee."

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