The government has published its response to their consultation on pension transfer & early exit charges. Article from Hargreaves Lansdown.

The key findings are: Government will place a duty on the FCA to cap early exit charges, with Trust based schemes also due to fall under similar scrutiny. Powers are expected by March 2017. 30% have had their planning impacted by an exit penalty. Over 40 percent of people surveyed said their transfer took more than 91 days.

Amongst the worse culprits, trust-based schemes forced to regularly report on their transfer processing performance. Nathan Long, Head of Pension Research: “Capping early exit charges will unshackle thousands, allowing them to enjoy the pension freedoms in all their glory. Research has shown that would be retirees have already had to change their plans because of punitive penalties.

The Government will also get tougher on transfer times, something which has been a thorn in the side of the retirees for years. Among the worst offenders, trust based companypension schemes will be forced into reporting their transfer performance. Transfers from these schemes currently take significantly longer and have to improve to give people a smoother, less stressful passage to retirement.”

Transfer Times

The following table shows the best and the worst of the transfer market, based on transactions to the Hargreaves Lansdown Vantage SIPP between January and August 2015; all providers have completed at least 20 transfers. Nathan Long: “There are a couple of obvious trends here: The most important one is that all the laggards have not bothered to invest in electronic transfers; the other is that mostly the insurance companies are doing a good job, whilst the occupational scheme providers are not. This demonstrates that whilst there are many benefits to using a trustee structure for pension provision, contract based pensions of the type operated can in some cases produce significantly better results for members.” All transfer delay data is based on the length of time taken from when the transfer request is first received by Hargreaves Lansdown to when the funds are received from the ceding scheme.

What investors should do

Get up to date statements – a valuable exercise at any point in time, but particularly on the run in to retirement. Pension provider response times can vary, some are instantly available on-line and others take over a month by post, so start now.

Understand the costs of exit – the FCA found that 670,000 people over 55 face an early exit penalty, but nearly 3.5 million do not – so check the small print. If you have an early exit penalty, work out when it naturally comes to an end. The FCA can cap charges, but looks unlikely to remove them entirely. Anyone who is very close to the point when they can take their pension without penalty may want to simply wait patiently.

Work out a retirement plan – accessing pension plans does not necessarily go hand in hand with finishing work. Work out how you plan to take your pension. Will you move part time, or access some of your pension whilst still working? Do you need to delay or change your investment strategy? You can then create a plan of which pensions you need to access and when, this can help to avoid using any plans whilst they have an early exit charge.

Consolidate pensions free from penalties – putting pensions without exit fees into one place now should make taking your pension when the time comes a far simpler and less stressful exercise.

If in doubt, take advice – when retirement comes it is often unchartered territory, so is one time when people can benefit from paying for professional financial advice.