Pension exit charges to be reviewed

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Chancellor George Osborne has said that the Government will consider imposing a cap on early exit penalties for people wishing to withdraw money from their pension savings.

This follows complaints about providers charging “excessive” fees.

Mr Osborne revealed that the Treasury would investigate such fees as part of a consultation starting next month.

Ground-breaking new pension rules introduced in April allow people over the age of 55 to withdraw cash from their pension savings which was designed to give greater flexibility to individuals.

Since then it transpires that not all pension companies are allowing partial cash withdrawals, leaving a significant number of savers looking to switch providers.

According to the Treasury, 60,000 people have accessed their pension savings since the reforms, transferring more than £1 billion out of their pension pots.

A consultation will now examine the costs, speed and ease of transferring to a new pension company.

The behaviour of some pension companies has led to the proposed freedom that people were set to enjoy, be severely restricted. Mr Osbourne has announced that investigations are now under way to see whether a cap on charges is viable, thus removing many of the barriers that are in place.

Conversely, the Association of British Insurers (ABI), who speak on behalf of the pension provider industry, are claiming that nearly 90% of customers eligible for withdrawing cash from their pension pot would not actually face early exit fees.

They explain that the fees that were being charged reflected expenses already paid by the provider in setting up the policy.

They reject the notion that unnecessary obstacles are hindering customers.

What is clear is the need for greater clarity, with many people being left confused about their pension options.

The prospect of further action on this topic is certainly interesting though, and one that should be tracked carefully when planning ahead with regards to your personal wealth.