The FCA has announced a cap of 1% on early exit penalties for those aged over 55.
Existing contracts will not be allowed to impose an early exit charge of more than 1%, and new contracts (from 31 March 2017, which is when the rules will come into force) will not be allowed to impose an early exit charge at all. Existing schemes with early exit charges of less than 1% will not be allowed to increase these.
Nathan Long – Senior Pension Analyst at Hargreaves Lansdown:
"The capping of early exit penalties at 1% is a huge step in the right direction. The 147,000 people aged over 55 who were facing exit penalties in excess of 5% will be relieved that they are now able to transfer to a more modern pension now the shackles have been released. It remains important to be vigilant when transferring pensions, as 1% could still be a chunky sum to lose from your pension at the point of retirement. There are also hundreds of thousands of people with large exit penalties under the age of 55 for whom the exit penalty cap will not help with pre-retirement consolidation, so it pays to be aware especially with older style pension plans."
NOTES TO EDITORS
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