Pension changes last year allowed people aged 55 and above holding pensions to be able to use their built-up pension fund for any purpose, rather than being forced to purchase an annuity with a minimum of 75% of the fund.
People have been quick to access funds under the changes and near 400,000 dipped into their pension funds - either to utilise the money or transfer it to a new pension. Unfortunately the pension providers applied early exit charges - in some cases up to 50% but generally around 5 - 15%.
The FCA (Financial Conduct Authority) forecasts that nearly 700,000 people potentially face exit charges with a number paying over £5,000 to access their pension fund. Based upon the findings the FCA wants to cap all exit charges to 1 percent of the fund value.
Once the new proposal come into force next April, new pension contracts being entered into will not be able to impose an exit fee at all.