The government has no plans to review the 1 per cent fee cap introduced last year for existing workplace pension customers over the age of 55, the City Minister has said.
In a written answer to Parliament yesterday (23 October), John Glen said the government continued to work closely with the Financial Conduct Authority (FCA) "to ensure there is a competitive, innovative retirement income market and that customers are treated fairly and benefit from appropriate protections".
In 2016, the regulator announced that providers can’t charge more than 1 per cent to savers wishing to access their pension pots early and were banned from adding exit fees to new contracts. These rules came into force on 31 March 2017.
Mr Glen said after the pension freedoms were introduced in April 2015, "some consumers were facing early exit charges of 5 per cent or more of the fund value".
He said: "The government estimated that the 1 per cent cap introduced by the FCA would lead to savings for consumers of £42.7m between 2017 and 2020."
Some providers have taken these rules further, such as Phoenix Life, one of the biggest closed book life companies in the UK.
The firm announced in August it would remove exit charges for policies valued at less than £5,000 and introduce a charge cap for ongoing charges on unit-linked policies in non-workplace pensions.
In particular, Phoenix said it would introduce a 1.5 per cent charge cap for policies with a value of more than £5,000, and a 3 per cent cap on policies valued at less than £5,000.
The provider said the move would benefit 250,000 non-workplace pension customers at a one-off cost to Phoenix of £68m.
maria.espadinha@ft.com
