The government has launched a consultation into pension transfers and early exit charges.
“The pension freedoms give savers greater choice and flexibility as to how they take an income from their pension pot, but not all customers are being afforded the same level of access by their provider,” said Richard Rowney, managing director of LV= Life and Pensions.
“We think that it is right that the transfer process and other barriers to exit are looked at so that everyone can easily take advantage of the new pensions landscape, and look forward to working with government to make this possible. We believe that retirement advice remains the most effective way to ensure that pension savers make the most of their fund, especially if they are looking to transfer their pension as they may have valuable safeguarded benefits.
“However the cost of advice can damage the value of smaller pension pots and, for these savers, the requirement to get advice can be seen as an unnecessary barrier. It effectively leaves them with no choice but to purchase an annuity from their vesting provider, which may not offer them the best rate or solution available.
“In order to help close the advice gap, we recently launched, CORA, the first regulated online advice service designed to make advice more accessible to those approaching retirement with smaller pension pots.”
The Association of British Insurers (ABI) has claimed that nearly nine in 10 customers eligible for the pension freedoms will not face early exit fees, and no pensions being sold today include them.
The trade body also stated that where some older schemes charge an exit fee this is not a new penalty but reflects the costs of setting up the policy already paid by the provider. This would normally be paid back by the saver if they had stayed in the scheme to their retirement date as originally intended. Other customers with pensions will have already paid their own fees, either when they joined a scheme or over its lifetime.