The government has published its response to the pension transfer and early exit charges consultation, promising those looking to access their pension pot under the freedoms will benefit from further action to “remove unjustifiable barriers”.
Secretary to the Treasury Harriett Baldwin said that these finer details follow the chancellor’s statement last month that the government would limit early exit charges, giving the Financial Conduct Authority extra powers to cap excessive fees.
The full response outlines that: |
Government will introduce a new requirement for trust-based pension schemes to regularly report on their performance in processing transfers. |
The Pensions Regulator will issue new guidance for scheme trustees to ensure transfers are processed quickly and accurately. |
Pension Wise will develop new content on the transfer process, which will include information on likely timescales, what customers need to do and greater clarity on whether financial advice is required. |
The consultation found while the majority of eligible individuals are able to access their pension under the at-retirement reforms, there are a small but significant number who have been effectively prevented from accessing the freedoms because of high exit charges or long transfer times.
For FCA-regulated contract-based pension schemes, transfers took 16 days on average, however, The Pensions Regulator data showed the mean transfer time for trust-based pensions was 39 days, with many consumer survey respondents saying that they had to wait significantly longer for individual transfers.
Ms Baldwin said it is only fair that people who have worked hard and saved their entire lives are able to access their pensions flexibly, “without facing any unjustifiable barriers”.
Pensions minister Baroness Ros Altmann said: “No consumers should have to pay excessive early exit fees, regardless of the type of scheme that they are in. And we will be working to ensure that action is taken to protect members of trust based schemes.”
Lesley Titcomb, chief executive of TPR also welcomed the government’s commitment, stating she would be working closely with the industry to deliver the recommendations of the response.
It will issue further guidance for trustees on standards through its defined contribution code, including how transfers can be processed promptly and accurately without exposing savers to a greater risk of pension scams.
As part of the consultation the government conducted an online consumer survey – with more than 70 per cent of respondents supporting a legislative cap.
Andy Bell, chief executive of AJ Bell, said that a formal cap on early exit charges that is consistent across providers and covered by legislation is absolutely the right decision.
“This will remove the most significant barrier that currently prevents hundreds of thousands of people from accessing their pension savings under the pension freedom rules. The only downside is that it won’t happen until March 2017.”
Meanwhile, Pinsent Masons’ pensions partner Tom Barton pointed out that in addition to the price controls, there will be a range of additional measures to facilitate transfers - guidance, reporting, greater use of technology and a new role for Pensions Wise.
“So too is a whitelist of ‘trusted’ receiving schemes of a certain quality – which puts pressure on master trusts to secure the master trust assurance framework if they want to play in the transfer space.”
peter.walker@ft.com
