ABI responds to Government announcement of a consultation into exit fees

“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.”

Background – explanation of exit fees

Nearly nine in ten customers eligible for the pension freedoms will not face early exit fees.

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.