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Early exit penalties for pensions capped at 1%

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Early exit charges for people accessing their pension pot will be capped at 1%, the Financial Conduct Authority (FCA) has confirmed.

The rules will come into force from 31 March 2017 and apply to anyone eligible to access the government’s pension reforms from age 55.

The regulator said early exit charges currently set at less than 1% will not be allowed to increase.

Christopher Woolard, executive director of strategy and competition at the FCA said: “People eligible for the government’s pension reforms should feel able to access them as they wish.

“The 1% cap on early exit charges for existing pensions, and the 0% cap for new contracts, will mean that current and future savers will not be deterred by these charges from accessing their pension pots.”

Hundreds and thousands of savers have faced early exit charges since the pension freedom rules came into force in April 2015, with some providers charging as much as 10%.

Tom Selby, senior analyst at AJ Bell, said: “The cap on early exit fees for pensions, including occupational schemes, is a start but 1% of a £100,000 pension is still a £1,000 charge for accessing your own savings.

“The pension freedoms are now well established yet there are still thousands of people that are going to have to pay thousands of pounds to access them.

“We hope the authorities continue to monitor the cap to assess whether it should be lower or even abolished if early exit penalties continue to prevent people utilising the new flexible pension rules.”

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