Savers to be surveyed on pension exit fees as part of plans to remove 'barriers' to freedoms

The survey has been published alongside a consultation on options to address these perceived barriers, including cutting or capping exit charges for those looking to access their pensions early or transfer to another scheme. The work will be complemented by an information-gathering exercise on the fees and charges that customers currently face, to be conducted by the Pensions Regulator and the Financial Conduct Authority (FCA).

The press and various government figures have raised concerns in recent weeks that some pension providers and advisers have been "failing to play their part" in making pension freedoms available to savers, according to the government's announcement. But Simon Tyler, pensions expert at Pinsent Masons, the law firm behind Out-Law.com, said that many of the problems reported by consumers could be explained by the speed at which the government had introduced the changes.

"Instead of thinking that, maybe, the new options were introduced rather hastily before providers and advisers could iron out all the glitches, the government has decided to look for evidence that providers and advisers are to blame," he said.

"Of course the government will find some evidence of substandard practices, and those practices deserve to be rooted out. But how widespread are those practices, and what should a reasonable government response be? Providers are already in the process of expanding their options for members. Advisers are reluctant to provide complex transfer advice because, in most cases, a transfer won't be in the client's interests. Transfer processes are tortuous mainly because trustees and providers have to weed out pension liberation fraudsters. Exit fees are a problem, but fortunately they are limited to legacy schemes and are already on the agenda for independent governance committees," he said.

"In assessing what action to take, the government needs to take account of the practical challenges that providers and advisers have already been struggling with," he said.

The government announced last month that it would act to remove any "unjustified" barriers preventing people from accessing their pensions under the new regime, at the same time as announcing that 60,000 pension scheme members had accessed around £1 billion in savings since the changes were introduced in April. Around 85,000 pension scheme members have now taken advantage of the changes, which allow members of defined contribution (DC) schemes more freedom to access their savings once they turn 55 without facing heavy tax penalties or necessarily having to purchase an annuity to give them an income for life.

In its consultation, the government acknowledged that there was "limited consistent research" about the prevalence of exit fees, but that "as many as 1 in 10 savers in workplace schemes could be affected by charges when transferring their pension". In many cases these were "fair and reasonable charges to cover costs"; but it said that some fees were "significantly higher than others", particularly in relation to older schemes.

"Although the majority of these schemes are now closed to new members, a significant number of these plans continue to operate for existing customers," it said in its consultation.

The consultation sets out three potential options in relation to exit fees: a legislative cap on all fees; a "flexible" cap that could be used in certain circumstances; and an industry-led voluntary approach. Any cap would not apply to market value adjustments (MVAs), which are applied to the underlying value of a person's rights in a with-profits fund to reflect their leaving the fund before the date of majority; or prevent schemes from offering terminal bonuses to those who remain members until their selected retirement date.

The government is also seeking views on the effectiveness of the requirement for those with 'safeguarded' benefits of over £30,000 in a defined benefit (DB) scheme to seek independent financial advice before transferring into a DC scheme in order to take advantage of the new flexibilities, and whether anything should be done to protect advisers from liability where an "insistent client" transfers out against their advice. It is not proposing to change the rules, but has asked whether the process for seeking advice could be made "quicker and smoother, and clearer for individuals, firms and advisers".

"The government appreciates that there may be circumstances when individual schemes and providers may require independent advice in relation to a particular product," it said in the consultation. "However, the government does not want such requirements to become a barrier to accessing products and therefore wishes to avoid the situation where schemes and providers may feel forced to require advice where it is not necessary."

Currently, anyone wishing to exercise the new freedoms has the right to free and impartial guidance through the government-backed Pension Wise service. However, this service does not provide regulated financial advice.

The consultation and survey close on 12 October.