Speaking at Prime Minister’s Questions, he said that the Treasury will consult to ensure that 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.
In particular the consultation, due to launch next month, will look to address "any excessive early exit penalties", including the option of imposing a legislative cap on these charges for those aged 55 or over.
It also aims to make the process for transferring pensions from one scheme to another quicker and smoother.
However nine in ten customers eligible for the pension freedoms will not face early exit fees, according to the Association of British Insurers.
Some older schemes may charge an exit fee; this is not a penalty where customers leave the scheme early, but reflects expenses already paid by the provider, such as commission, in setting up the policy. This would normally be paid back by the saver if they had stayed in the scheme to their retirement date as originally intended.
The Economic Secretary to the Treasury, Harriett Baldwin, has also written to Martin Wheatley, CEO of the FCA, confirming that the FCA will gather information from providers to understand the scale of the problems facing individuals who want to transfer to a different pension provider.
Osborne announced yesterday that 60,000 people have already taken advantage of the new pension flexibilities.
Huw Evans, Director General, Association of British Insurers, said:
“With so many issues unresolved due to its rushed timetable, it is not surprising that the Government has had to announce this consultation today. Despite the lack of some crucial detail, insurers are continuing to work flat out to help customers on the basis of laws and regulations so far in place.
“We agree that further clarity is needed and have been calling for it for some time. But we reject any suggestions that the industry is putting up unnecessary obstacles to hinder customers exercising their pension options.
“It needs to be remembered that the vast majority of customers eligible for the pension freedoms will not face any early exit fee. Where one is charged it is not a penalty for leaving early, but to cover the costs of setting up the pension, particularly commission.”
However TUC General Secretary Frances O’Grady argued:
“Pensions freedom is looking increasingly like a botched DIY job. 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.”
