Financial consumer watchdogs plan to cap exit fees on pension savings to 1% and to scrap them altogether for new pensions starting after the rules are changed.
But the trade body speaking for pension providers, the Association of British Insurers (ABI) claims 80% of retirement savers pay no fees to access their money under pension freedoms – and if they do most pay 2% or less.
Chancellor George Osborne announced an impending end to pension exit fees in January.
He argued 700,000 retirement savers had to pay fees to take control of their own money under his pension freedoms.
In a hard-hitting speech he said: “I am not willing to see people ripped off or blocked from accessing their money by excessive charges.
Who has to pay charges
“We’ve listened to complaints from individuals and seen campaigns in the media and will act.
“People who have done the right thing and saved hard for their retirement will be able to fairly access their pensions.”
The Financial Conduct Authority, the agency responsible for regulating the pensions, says 16% of retirement savers face early exit charges.
A ‘significant minority’ were forced to pay up to 10% to take money from their retirement savings under pension freedoms introduced in April 2015.
The FCA says 670,000 savers aged over 55 faced charges:
- 358,000 faced a 0% to 2% charge
- 165,000 faced a 2% to 5% charge
- 81,000 faced a 5% to 10% charge
- 66,000 faced a charge of more than 10%
Pension firms dispute numbers
These seem at odds with the ABI figures.
Yvonne Braun, the ABI’s long term savings and investment director said: “More than eight out of 10 customers do not have to pay early exit charges to access their pensions, as the FCA has acknowledged.
“Where they do, most fees are 2% or less and were put in place decades before the pension freedom reforms were introduced. The ABI will engage closely with the government and the FCA on the consultations.”
The FCA has published a consultation paper setting out the proposed rule changes.
Besides the cap, exit charges will be scrapped on new pensions started after the rule changes are introduced.
