Exit charges capped under FCA proposal

Exit penalties for savers wishing to exercise the pension freedoms should be capped at 1% of the value of their fund the Financial Conduct Authority (FCA) has announced in a consultation document . The cap would apply to personal stakeholder and self-invested personal pensions. It would apply to existing contracts if an exit penalty is applied but only to people aged 55 or over. New contracts will have a zero cap.

Tom McPhail head of retirement policy at Hargreaves Lansdown said: ‘Capping exit fees will provide significantly better choices for investors wishing to use the pension freedoms.’

But he thought the cap should be 0% because ‘this would benefit a further 150 000 investors’.

As a result of the new cap applying only to savers exercising the pension freedoms people who wanted to transfer old expensive private pensions to improve their value...