A consultation set to be published next month will look into whether high exit fees are being charged to individuals seeking to access their pots “and if so options to deal with them”, the Chancellor George Osborne announced on 17 June.
Additionally, Osborne said the Financial Conduct Authority would look into the barriers individuals face when looking to switch pension provider.
The FCA will “carry out an information gathering exercise to develop the evidence base on the nature and scale of the problems facing individuals who want to transfer to a different pension provider, including both charges and other barriers to switching”, the Treasury said in a statement.
The issue of exit fees, particularly on older, poor value schemes, was raised by stakeholders and ministers in the run-up to the retirement reforms.
From 6 April, pensions savers aged 55 or over with defined contribution (DC) schemes were given unprecedented access to their savings.
However, though many providers declared their readiness for the reforms, which were first announced more than a year before, there have been reports of individuals facing difficulties accessing their pots, including because of “punitive” exit charges.
A report in the Financial Times suggested exit penalties for savers could typically range between 5% and 15%, but could reach 50% in a few cases.
Fidelity retirement director Alan Higham told the paper prior to the freedoms’ roll-out in April: “The doors to pension freedom won’t be wide open in April 2015. Many may find them locked and bolted [and will need] to move providers to get freedom.”
However, the Association of British Insurers said nearly nine in 10 customers eligible for the pension freedoms will not face early exit fees.
