The Government’s three month probe into pension exit fees has been described as a “wakeup call to those providers who still think pensions born in the 1990s are fit for the 21st century”.
‘Excessive’ early exit charges have been placed at the heart of an investigation into firms failing to make the new freedoms available to savers.

The Treasury has called for solutions to tackle such penalties as it started a consultation yesterday, with the aim to “ensure that people can access the new pension flexibilities easily”.

Officials have asked pensioners and industry experts how to “remove other barriers”.

Chancellor George Osborne and Secretary of State for Work and Pensions Iain Duncan-Smith have raised concerns that some companies are failing to play their part in making pension freedoms available to savers.

{desktop}{/desktop}{mobile}{/mobile}

Danny Cox, Financial Planner at Hargreaves Lansdown, said: “Unreasonable and archaic exit penalties have been a thorn in the pension industry’s side for many years. This consultation serves as a wakeup call to those providers who still think pensions born in the 1990s are fit for the 21st century.

“Too many pension providers aren't offering the new flexibilities or making it sufficiently easy for their customers to take their money elsewhere. Providers should not restrict those who want to move to the low cost and highly flexible pensions of today.

“The barriers to pension freedoms need to be removed so that investors who have shopped around can move their money quickly and cheaply, without having to pay unreasonable exit penalties. We need a transparent and competitive retirement market where informed investors are freely able to shop around for the solutions which will suit them best.

Martin Tilley, director of technical services of Dentons Pension Management, believes, however, that the obstacles to the freedoms have been overstated.

He said: “It is unfortunate that the review appears to have been driven following national and consumer press coverage which has in our own experience exaggerated the degree to which some of these barriers exist.

“I have no doubt that some of the exit penalties are unpalatable although these are likely to apply in a significant minority of cases. I am hopeful that the industry which now has the appropriate means of outlining the facts behind the headlines can assert in their responses that some of the draconian threat of some proposed actions are unnecessary.”

Richard Rowney, managing director of LV= Life and Pensions, said: “The pension freedoms give savers greater choice and flexibility as to how they take an income from their pension pot, but not all customers are being afforded the same level of access by their provider.

“We think that it is right that the transfer process and other barriers to exit are looked at so that everyone can easily take advantage of the new pensions landscape, and look forward to working with Government to make this possible.”