The Treasury has called for solutions to tackle such penalties as it started a investigation this morning.
A consultation was launched this morning, with the aim “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.
Today’s consultation document stated: “The government wants to ensure that people can access the new pension flexibilities easily, and at reasonable cost.
“This consultation is seeking responses on options to address possible barriers to people switching their pensions to access the new freedoms including, excessive early exit penalties, the process for transferring pensions from one scheme to another, and the circumstances in which someone should seek financial advice.”
Officials are asking what consultees believe would constitute an ‘excessive’ or unfair early exit charge.
Question 4 asks: “Are you aware of any evidence of exit charges impacting on individuals’ decisions to access the flexibilities? Are there any examples of individuals losing out as a result of not being able to access the flexibilities in these circumstances?”
The consultation will look at how best to remove barriers and in particular will investigate:
• options to address excessive charges for early exit penalties. This includes the option to impose a legislative cap on these charges for those 55 or over if there is sufficient evidence
• how the process for transferring pensions from one scheme to another can be made quicker and smoother
• how to ensure that there is greater clarity around the circumstances in which someone should seek financial advice
The Economic Secretary to the Treasury, Harriett Baldwin, and the Minister for Pensions, Dr Ros Altmann, have also written to the FCA and The Pensions Regulator asking them to gather information from the industry on the fees and charges customers currently face. TPR and FCA have already begun working on this.
The consultation will run for 12 weeks and a response will be published in the Autumn. An online survey will run alongside the consultation for 12 weeks and will form part of the government’s response.