FCA imposes 1% cap on early exit pension charges

The Financial Conduct Authority has announced plans to cap early exit charges on personal pensions.

The regulator has released a statement which sets the rate of charges at a maximum of 1% of the value of benefits being taken or transferred from existing personal pensions, including workplace personal pensions. This also means that existing schemes which already have early exit fees which are less than 1% cannot be increased. 
The move comes in response to the perceived barriers to accessing the new pension freedoms for consumers eligible to access them from the age of 55. New pension schemes which are entered into after the policy comes into effect on the 31st March cannot impose any kind of early exit charges at all.
The FCA has estimated that the charge cap could cost providers between £46 million and £89 million over four years, with compliance costs suggested to be around the £17.4 million mark.
FCA executive director of strategy and competition Christopher Woolward said of the announcement;
“The 1 per cent cap on early exit charges for existing pensions, and the 0 per cent cap for new contracts, will mean that current and future savers will not be deterred by these charges from accessing their pension pots.”