Proposals to prevent people in occupational schemes facing exit charges for accessing their pensions early have been launched by ministers.
The changes proposed will give people in occupational pension schemes access to pension freedoms without the prospect of high penalty charges and will ensure greater consistency across the pensions landscape.
Minister for Pensions, Baroness Ros Altmann said:
These changes are about giving everyone who has worked and saved hard for their retirement a fair deal by removing the final barriers to the pension freedoms. I encourage the industry and all those with an interest to contribute to this debate.
I urge people to continue to work hard, plan and save for their future, and we will continue to reform the pension system so that it delivers for them.
The Department for Work and Pensions (DWP) will engage with industry on the proposals to introduce a cap for occupational pension schemes. The consultation will build on past government consultations and considers what action is required to ensure equality of treatment for members of occupational pension schemes.
Economic Secretary to the Treasury Harriett Baldwin said:
The government are delivering the most far-reaching changes to pensions in a generation. Over 230,000 people took advantage of our pensions freedoms in the first year by accessing £4.3 billion flexibly from their pension pots.
Today’s consultation signals our continued commitment to ensuring that pensions freedoms work fairly for people in practice and that hard-working individuals who have taken out occupational schemes are not disadvantaged.
The intention is that any cap should apply across both occupational and personal pension schemes.
Read the DWP consultation – Capping early exit charges for members of occupational pension schemes – which runs for 12 weeks.
As part of this consultation, HM Treasury is seeking views on the definition of ‘market value adjustments’ which will be excluded from the Financial Conduct Authority (FCA) cap.
The consultation is aimed at pensions industry bodies and professionals, trustees and scheme managers, pension scheme members and beneficiaries, employers and representative organisations.
The consultation is complemented by the work being undertaken by the FCA on the level of the cap for personal pension schemes and by HM Treasury on the nature of the exemptions for its scope.
This consultation builds on HM Treasury’s consultation Pension transfers and early exit charges (July 2015) and the government’s response (February 2016) and considers what action is required to ensure equality of treatment for occupational pension schemes and to identify any government action required in this area.
Separately, the FCA has today published a consultation on the proposed level of the exit charge cap for contract-based personal pensions.
In the context of the greater access and choice introduced by the pension freedoms some early exit charges pose a barrier to individuals accessing their savings flexibly and the government has concluded that action needs to be taken to limit these charges.
In January 2016 the Chancellor announced that HM Treasury would give the FCA a new duty to cap early exit charges for personal and stakeholder pension schemes in order to ensure that these charges do not present a barrier to consumers who want to access their pension savings flexibly.
For a cap on exit charges to be effective it needs to apply across the whole of the pensions market unless evidence emerges that differences between FCA regulated pension schemes and occupational pension schemes means a different cap is required.
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