4,000 face 40% or higher pension exit fees

A leading pensions expert says the number of people found to be facing exit charges in a major FCA study is ‘significant’ - despite being lower than many might have expected. The FCA yesterday published masses of data on the take up of the pension freedoms, which showed 84% of consumers aged 55 and over would not experience any exit charge.There had been major concerns, leading to the Government calling for the review.Although the majority appeared to be free of exit charges, the FCA calculated that about 147,000 of consumers aged 55 or over (3-4%) would face a charge greater than 5%. About 4,000 people face charges of 40% or above, 17,000 face 20-40% exit fees and 45,000 face 10-20% penalties.Some 165,000 (4%) would face a charge of 2% to 5% and 358,000 (around 9%) would face a charge of 0% to 2%.{desktop}{/desktop}{mobile}{/mobile}Andrew Tully, pensions technical director, at Retirement Advantage, said: “Although 84% of people don’t experience any exit charge, that does leave a significant minority who do, with some facing a charge of 5% or more. Given many firms are not offering the full range of options to customers currently, this does seem penal for people who want to use the new options available.“This early data shows people are making full use of pension freedoms, which is encouraging. However, I would urge caution reading too much into the detail at this stage, simply because this is a snapshot of the first three months, which will be skewed by the pent-up demand from the people who would have held off until they could withdraw their savings in full.”Mr Tully said the report suggests product development is not a top priority for many companies, with only 1 in 5 firms indicating they were planning to develop new options.He believes, however, these new ideas will start to appear over the coming months.He added: “It is good to see a commitment from the FCA to provide a quarterly report into this evolving market.”Billy Mackay, marketing director at AJ Bell, said: “The main reason given for exit fees is to cover initial costs but you have to question whether it is reasonable to still be collecting charges for events that may have happened around a quarter of a century ago. Exit fees should be relevant to the work carried out by the provider today and set at a reasonable level. It is debateable whether some exit fees really do relate exclusively to initial set up costs or whether they are actually about on-going provider profitability.”Other key stats:- 204,581 pension policies have been accessed- 71,455 consumers have accessed some form of income drawdown option- 120,688 consumers have accessed some form of cash withdrawal- 12,418 annuities were sold in the first three months

4,000 face 40% or higher pension exit fees

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