CP16/15: Capping early exit pension charges

On 19 January 2016 the Chancellor announced that the government would introduce legislation to place a new duty on the FCA to cap early exit charges in certain pension contracts. This Consultation Paper (CP) sets out our proposals on the application and level of a cap – and the changes to our Handbook rules – that we believe are required to discharge the duty being placed upon us.

Why are we consulting on this?

This consultation is specifically concerned with our approach to discharging the duty to be imposed on the FCA to cap early exit charges for consumers accessing the pension freedoms. The primary legislation defines early exit charges and the purpose of the cap and the duty is narrowly focused on these charges. 

This consultation does not cover other charges that firms may apply during the lifetime of a pension policy and is not directly related to our recent thematic review of the fair treatment of long-standing customers in the life insurance sector.

CP16/15: Capping early exit pension charges (PDF)

Who is this paper aimed at?

Our proposals will most directly impact on:

  • consumers with pensions savings who would incur an early exit charge for accessing the pension freedoms
  • providers of personal and stakeholder pensions – including operators of self-invested personal pensions

Our proposals may also be of interest to:

  • individuals and firms providing advice and information in this area
  • trade bodies representing financial services firms
  • consumer bodies

Our proposals are likely to be of most interest to those consumers with personal pensions who, after our rules come into effect, face early exit charges when they wish to access their pensions savings at or after age 55 but before their expected retirement date.

The statutory duty, and hence our proposals, do not make any provision for consumers who have already exited early from their policy or policies.

Next steps

We will publish feedback on responses and issue a Policy Statement once we have reviewed your comments.

Find out more

Pension freedoms: our analysis and findings

Pension freedoms data infographic

Consumers: About pensions