Financial regulator confirms pensions cap

The Financial Conduct Authority (FCA) has announced that early exit charges for pensioners who want to remove money from their pot will be capped at one per cent.
A cap will now be introduced on exit fees for people who are over the age of 55. It will apply to those who currently have pension contracts and will ban exit charges altogether for new pension contracts.
The proposals were first put forward by the government earlier in 2016 to nudge people into utilising greater pension freedoms. They will now come into effect in from March 31 next year.
People who want to remove cash from a scheme, including workplace personal pensions, will be affected from next April.
Pensions’ providers who already charge less than one per cent will not be allowed to increase their fees under the changes.
Currently, some providers are charging fees as high as 10 per cent. That followed the government announcement that anyone over the age of 55 could withdraw as much as they wanted. The Treasury hoped that the move could stimulate the property market, with pensioners opting to use money to help family members onto the first rung of the housing ladder.
FCA executive director of strategy and competition at the FCA said his organisation wanted to make sure that those who could take advantage of the government’s pension reforms could access them as they wished.
He added: “The 1% cap on early exit charges for existing pensions, and the 0% cap for new contracts, will mean that current and future savers will not be deterred by these charges from accessing their pension pots.”
However, the new rules could still hit people who have bigger pension pots hard, as even one per cent can add up to a big bill.
Personal finance expert Hannah Maundrell said while the changes were good news for those starting out on their pensions journey, she added: “The question remains though, why can’t this be the case for all customers to create a really level playing field?”
She said that fees and charges associated with pensions products were far too complicated because customers did not know what the charges were, or what they should be paying, making it impossible to make informed choices. It was therefore vital, she added, that customers asked about such costs as annual management fees.