Chancellor George Osborne said he will place a duty on the Financial Conduct Authority (FCA) to cap ‘excessive’ early exit charges for people accessing the pension freedoms which were introduced in April 2015.

Osborne announced plans to introduce a cap on exit fees but did not stipulate the level at which the cap would be set or when it would come into force.

But the Treasury has confirmed there are no plans to backdate this move to the time when the pension freedoms were first introduced.

The Treasury launched an investigation into early exit fees last summer following reports of investors experiencing problems accessing their retirement savings.

According to FCA data, 670,000 savers aged 55 or over have faced an early exit charge. Of these, 358,000 faced charges between 0% and 2% of the value of their pension pot; 165,000 faced charges between 2% and 5%; 81,000 faced charges between 5% and 10% and 66,000 faced charges of 10% or more.

Tom McPhail, head of retirement policy at Hargreaves Lansdown said: “We welcome this announcement; hundreds of thousands of pension investors currently face charges and restrictions if they want access to the pension freedoms or to transfer their money to a new pension arrangement. In some cases these penalties can run to hundreds or even thousands of pounds. This kind of financial bondage has no place in the 21st century.

“Investors who are looking to take advantage of the freedoms but who are currently facing exit penalties, may want to hold back now in order to benefit from the new ban, though it is unclear at this stage how rapidly the change can be introduced.”

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