Citizens Advice calls for £50 cap on pension exit charges
Pension exit charges should be capped at £50 and only permitted where providers face genuine administrative costs of exit or transfer, says Citizens Advice.
In its response to the Government’s pension transfers and early exit charges consultation the national charity warns that excessive exit or transfer charges and delays in accessing pension pots risk putting savers off exercising their new pension freedoms.
Analysis by Citizens Advice for its response reveals that more than two million consumers could face an exit charge of over £50, including almost 40,000 who could be hit with a charge of more than £5,000.
The charity argues that it is in all parties’ interest for exit charges to be seen as reasonable. The pension freedom agenda will be hindered if people do not feel that they have fair access to their pensions, and worries about having to pay unfair fees to access pension savings could put people off long-term pension saving.
Citizens Advice also calls for a maximum pension transfer time limit to be introduced, following the time limit model introduced in other areas of financial services such as switching current accounts or ISA transfers. In its consultation response it suggests aiming for a 15 day time limit but also calls for safeguards to ensure this does not put consumers at greater risk of scams.
Gillian Guy, Chief Executive of Citizens Advice, said:
“Excessive exit charges risk stifling the pension freedoms.
“If people do not feel they have fair access to their pensions they may choose not to take advantage of pension reforms, even if this might be the best option for them. Providers must be transparent about costs and any exit charge or transfer fee should reflect the actual cost of a customer’s decision to move their pension savings.
“Six months on from the introduction of pension freedoms many consumers have enjoyed a smooth process when accessing their pension savings. But a significant minority have faced challenges such as high charges and delays. The industry must work with Government to iron out these difficulties and ensure all consumers are free to make the best pension choices for them.”
Notes to editors
The figure of two million facing exit charges of over £50 if for contract-based pensions only. It is based on FCA figures on numbers of consumers incurring exit charges, which include a band of fees <£250. For the figure of those paying more than £50, we assume that there is even distribution of fees and therefore that 80% of these consumers will face a fee of between £50 and £250. This is from FCA pension freedom data collection exercise: analysis and findings, September 2015, page 30.
40,000 facing exit charges of over £5,000 based on analysis of FCA pension freedom data collection exercise: analysis and findings, September 2015, page 30.
The Citizens Advice service comprises a network of local Citizens Advice, all of which are independent charities, the Citizens Advice consumer service and national charity Citizens Advice. Together we help people resolve their money, legal and other problems by providing information and advice and by influencing policymakers. For more see the Citizens Advice website.
- The advice provided by the Citizens Advice service is free, independent, confidential, and impartial, and available to everyone regardless of race, gender, disability, sexual orientation, religion, age or nationality.
- To get advice online or find your local bureau in England and Wales, visit citizensadvice.org.uk
- You can get consumer advice from the Citizens Advice consumer service on 03454 04 05 06 or 03454 04 05 05 for Welsh language speakers.
- Local Citizens Advice in England and Wales advised 2.5 million clients on 6.2 million problems in 2014/15. For full service statistics see our publication Advice trends.