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Cap on pensions charges mooted

Published 17/06/2015

Chancellor Osborne stands in for David Cameron at Prime Minister's Questions
Chancellor Osborne stands in for David Cameron at Prime Minister's Questions

The Government is considering a cap on the amount savers are charged to withdraw money from their pensions, the Chancellor has said.

George Osborne said there were "clearly concerns" that some companies are not doing enough to make the new freedoms, introduced earlier this year, available.

Standing in for David Cameron at Prime Minister's Questions, he told MPs: " The pensions freedoms we introduced in April deliver a fundamental Conservative principle that people who have worked hard and saved hard all their lives should be trusted with their own money.

"There are clearly concerns that some companies are not doing their part to make those freedoms available.

"We are investigating how to remove barriers and we are considering now a cap on charges. I'm asking the Financial Conduct Authority to investigate.

"People who have worked hard and saved hard deserve a better deal."

He was responding to new Tory MP Nigel Huddleston (Mid Worcestershire), who asked: "Will you do all you can do to make sure that the industry lives up to its side of the bargain and delivers on those freedoms?"

Yesterday, Mr Osborne announced that some 60,000 people had already made use of the changes, transferring more than £1 billion out of pots.

The reforms mean savers can spend their pension as they like without facing large charges, although not all providers are yet offering all of the options, which include withdrawal of a lump sum.

The Treasury will launch a consultation next month to ensure people are not charged excessive early exit penalties and are treated fairly when moving their pension to a company that offers them flexible options to access their savings.

It will look at a range of options for addressing the issue, including the imposition of a legislative cap on the charges for those aged 55 or over.

It will also consider how to make the process for transferring pensions from one scheme to another quicker and smoother, to help people to make use of the new freedoms.

Harriett Baldwin, Economic Secretary to the Treasury, has written to Martin Wheatley, chief executive of the FCA, to confirm it will gather information from providers.

TUC general secretary Frances O'Grady said pensions freedom was looking " increasingly like a botched DIY job".

She added: "The Chancellor is attempting to shave a bit off here and add a bit there just to make his flagship policy work.

"There were plenty of warnings that rushing in these changes was unwise. We need genuine action to remove unfair fees and charges on all pensions. Piecemeal reform would just be letting savers down."

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