The Pensions Regulator has commenced work on a survey into the prevalence of exit fees and the transfer process in occupational defined contribution schemes.
The survey will be conducted amongst a “representative sample of schemes” to inform the government’s consultation on options to address excessive early exit penalties and improve the transfer process.
The government said the consultation will look at options to address any “excessive” early exit penalties, including a possible legislative cap on charges for those aged 55 or over.
Some older policies can levy as much as 20 per cent of the fund value to exit, especially on policies where set-up charges and initial commissions were rolled into ongoing premiums over the life of the policy.
TPR expects to publish the results of the survey later in the summer and noted that the Financial Conduct Authority is undertaking a complementary request for data from pension providers.
In an exchange of letters published by the government, Harriett Baldwin, economic secretary to the Treasury, said while a consultation into the issue, announced yesterday, is ongoing the FCA should still be on the lookout for instances where firms levy “unnecessary and unfair” charges.
TPR said the information gathered will complement existing discussions with multi-employer and large single employer schemes that already provide, or are considering offering, new flexible decumulation options.
These discussions will examine more broadly the operational readiness, governance and member communications of these schemes.
TPR also stated that it is undertaking activity to understand the impact of new flexibilities on defined benefit schemes, along with any subsequent risks and the application of its regulatory guidance.
“We remain committed to making pension flexibilities work in the interests of retirement savers and expect to conduct further research on decumulation, to include costs and charges, in the autumn,” read a statement from the regulator.
“We will consider with government and the FCA what further action may be required to promote good outcomes for members.”
peter.walker@ft.com
