Retirement savers are ripped off or blocked from spending their own money by high charges imposed by pension firms when they try to spend money under flexible access rules, claims Chancellor George Osborne.
He accused UK onshore pension providers of unfairly dealing with customers when announcing a cap on pension exit charges for savers seeking to draw money from their funds under the flexible access rules introduced in April 2015.
The announcement appears to place a cap on early exit fees for registered pensions.
By default these changes would also apply to Qualifying Recognised Overseas Pension Scheme (QROPS), which are also registered pensions even though they are based abroad.
New law to cap exit charges
The wording of the Chancellor’s statement and the accompanying documents does not mention QROPS or any other offshore pensions, so how this would apply to expat pension investors is not yet known.
Osborne has said the government will introduce new regulations to force pension providers to cap their fees under the Pension Transfers and Exit Charges consultation.
The government will publish more detail about the new rules in a response to the consultation soon, probably before Budget 2016 on March 16.
Research by pensions regulator the Financial Conduct Authority (FCA)revealed 670,000 retirement savers aged over 55 would have pay an early exit charge to access their pension cash.
Rip off fees and blackmail
Just over 80,000 paid between 5% and 10% of their drawdown fund value, while 66,000 had to pay more than 10%.
As a result, tens of thousands of retirement savers decided not to take their cash – about 400,000 decided to take some or all of their pension funds under flexible access.
“The government is not going to let pension firms rip off or blackmail customers into paying excessive costs to withdraw their own money to spend how they like under flexible access rules,” said the Chancellor.
“We have seen newspaper campaigns about this and heard consumer concerns and intend to act.
“I will change the law to give the FCA the power to impose a cap on high charges. It’s only right that people who have saved hard should be able to access and spend their money without these charges.”
