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24 Jun 2015

Osborne To Scrap Penalties For Early Pension Withdrawals

Chancellor George Osborne has announced plans to impose a cap on ‘excessive´ fees charged to savers who try to access their pension money early, The Telegraph reports.

The publication recently reported on the issues being faced by many retirees following the new pension rules, with some 350,000 people aged 55-65 being hit with a charge of up to 20% for wanting to withdraw money from their pension pots before they reach a pre-specified ‘retirement date.´

Calling the fees “unjustifiable,” Mr Osborne has reacted to the newspaper´s ‘Make Pensions Freedoms Work´ campaign by promising a consultation on the capping of “excessive” early exit charges, which is due to begin next month.

Standing in for David Cameron at a recent Prime Minister´s Questions, Mr Osborne acknowledged that some pension providers are “not doing their part” to make the freedoms intended by the reforms possible.

“We are investigating how to remove barriers and we are considering now a cap on charges,” he announced.

The Telegraph´s pensions campaign brought to light the fact that for millions of retirees, accessing their money has been more difficult than the government suggested it would be when the reforms came into force in April.

With the new rules stating that savers would no longer have to buy annuity with their savings, those aged 55 and above were told they would be able to use their savings like a bank account; but high exit fees and poor co-operation from providers have made this harder than expected.

In some cases charges have been as high as 20%, while some industry executives have privately admitted that smaller charges of 1-5% were simply “unnecessary.”

“It is not acceptable to charge punitive exit penalties or to insist that investors pay for a financial adviser,” stressed Tom McPhail, head of pensions research at Hargreaves Lansdown.

Meanwhile, Huw Evans - director general of the Association of British Insurers – said that most customers would not be hit with exit fees, and affirmed that the trade body “reject(ed) any suggestions that the industry is putting up unnecessary obstacles.”

Copyright M2 Bespoke 2015

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