Pensioners hoping to access their retirement savings early have been handed a boost as the government announced plans to cap charges at one per cent.
At present, people can be hit with exit charges of around five per cent for cashing in their pension savings early.
But minister for pensions Richard Harrington announced that fees for existing occupational pensions will be limited to one per cent and set at zero per cent for any new contracts.
The move will bring charges for workplace pensions in line with other personal and stakeholder pensions.
“We are restoring fairness and creating a level playing field in a system that has favoured the interests of providers over consumers for too long,” said Harrington.
“This new cap will protect people’s savings from excessive charges, so more of their money will go towards the comfortable retirement they have saved for.”
The cap on exit charges will be overseen by The Pensions Regulator (TPR). Andrew Warwick-Thompson, executive director of TPR, said:
“We welcome the Department for Work and Pensions’ announcement to implement a cap on early exit charges for occupational pensions.
“It is important that there should be a level playing field between trust and contract based pension schemes.
“This is another important step in helping to ensure the best possible outcomes for savers.”
The news came as the Financial Conduct Authority also announced plans to cap exit charges for personal and stakeholder pensions at the same level.
The government will consult on the regulations in early 2017, with the exit charges cap set to come into force in October 2017.