Government boosts pension freedom by slashing access cost

Retirees dipping into their pension pots will keep more of their cash after plans were unveiled to cap punitive early exit charges.

The Government’s proposal limits the charge to 1% of the size of savings and it is thought this will boost early exiters by 25%.

The move is designed to increase the number of people taking advantage of so-called pension freedom changes, which allow people access to their retirement savings from 55 onwards.

“This is an important step so people feel able to access their pension savings should they wish to,” Financial Conduct Authority director Chris Woolard said. “This aims to ensure consumers enjoy the Government’s pension reforms.”

Life insurance companies, investment firms and personal pension operators have all charged savers to withdraw money from their pension. There is also a consultation for similar caps in occupational pension schemes.

Tata’s £15 billion British Steel pension plan has welcomed a consultation by the Government to cut member benefits and keep it out of the pension protection fund. Ministers have paved the way to link benefits to a lower level of inflation and ringfence it. The scheme is seen as a barrier to selling Tata.