UK chancellor George Osborne said the Treasury will begin a consultation next month to see if there is any evidence of excessive early exit penalties, and will look into the option of imposing a legislative cap on these charges for those aged 55 or over.
The inquiry will also look into whether there is anything more the Government can do to make the process for transferring pensions from one scheme to another quicker and smoother, in order to help people make use of the new freedoms.
In tandem with the move, the economic secretary to the Treasury, Harriett Baldwin, has also written to the chief executive of the Financial Conduct Authority, Martin Wheatley, to make sure the FCA gathers information from providers on the scale of the problems facing those who want to transfer to a different pension provider.
The new pension freedoms, which came into effect on 6 April, allow people with defined contribution pension pots unrestricted lump sum withdrawals from their savings after age 55, ending a long standing and widely unpopular requirement for retirees to buy annuities.
Over the weekend Work and Pensions minister Iain Duncan Smith signalled the Government’s growing impatience with pension providers over implementing the reforms by warning the industry to stop dragging its feet.
Osborne said that so far 60,000 people have taken advantage of pensions flexibilities in the first few weeks of them being introduced, and have collectively withdrawn more than £1bn.
Losing patience
“The Government appears to be losing patience with those elements of the pensions industry which are failing to measure up to the promises of freedom,” said Tom McPhail, head of pensions research at Hargreaves Lansdown.
“Every pension investor over the age of 55 should be able to access their retirement savings with the minimum of cost and administrative inconvenience. It is not acceptable to charge punitive exit penalties or to insist that investors pay for a financial adviser,” he said.
