Chancellor George Osborne announced on 19 January that the Treasury would legislate to cap excessive early exit charges levied on savers using the pension freedoms.
Speaking in the House of Commons, Osborne said while the pension freedoms had been welcomed by savers, the Government remained concerned that roughly 700,000 people face early exit penalties if they move their savings in response to the pensions freedoms which are applicable to defined contribution pension schemes.
HM Treasury announced that the FCA would be responsible for setting the level of the cap and would consult fully in due course.
There were concerns as to whether the cap would also apply to trust-based schemes. In response to these concerns, Pensions Minister, Ross Altman announced on Twitter that she would ensure there was a cap on exit penalties in trust-based schemes, alongside the FCA cap for contract-based schemes, so that all savers have the same help.
A survey published in September 2015 by The Pensions Regulator, found that 6% of members were in a trust-based scheme in which an exit cost or charge would be levied if they chose to exit, while 94% were not.
It is not clear when the exit fee caps will come into place but more details may be announced in the Government's formal response to the pension transfers and exit charges consultation which will be published shortly.
The announcement from the Chancellor, and response from Altmann, demonstrate the Government’s commitment to delivering greater freedom to pensioners.