The FCA has finalised plans to cap pension exit charges at 1 per cent.
The regulator has confirmed the cap will be applied from 31 March 2017 and include the value of existing contract-based personal pensions, including workplace arrangements. But it will be delayed by six months for those in trust-based occupational pension plans.
The confirmation draws months of speculation to a close. News of the restriction was first announced by the chancellor in January and then outlined in Consultation Paper 16/15: Capping early exit pension charges issued in May.
Claire Walsh, chartered financial planner at Aspect8, said: “This is great news for the public and advisers.”
Robert Wilcocks, director and financial planner at Wilcocks & Wilcocks, echoed this view and suggested it could have huge benefits for many consumers. “I have seen 40 per cent exit penalties on certain EPPs. It’s completely unfair and outdated in the principles of Treating Customers Fairly for life companies to have, and insist on, such contracts.”
The policy statement, 16/25, states the 1 per cent cap will apply to ‘the value of a member’s benefits being taken, converted or transferred from a scheme’. It also prevents schemes with existing exit charges of less than 1 per cent from increasing them.
But arguments for the full removal of exit penalties still rumble on, especially now pension freedoms have lifted many other restrictions.
“I have no sympathy for providers who reduced their initial charges and instead applied an exit charge,” said Robert Little, chartered independent financial planner at Bob Little & Co. “[Waiving all exit fees] would be warmly welcomed by advisers, the FCA and, most importantly, consumers.”
Kusal Ariyawansa, chartered financial planner at Appleton Gerrard, felt that responsibility should now sit with providers to completely abolish the fees.
“Exit charges apply where your interests are placed ahead of those for whom you’re meant to be looking after,” Mr Ariyawansa said.
craig.rickman@ft.com
