The Financial Conduct Authority (FCA) has announced the level at which it will consult to cap early exit charges for those consumers wishing to make use of pension freedoms in the UK

The FCA has proposed that for existing contract-based personal pensions, including workplace personal pensions, exit charges will be capped at 1% of the value of a member’s pot. Firms will not be able to apply any exit charge for personal pension contracts entered into after the proposed new rules come into force.

FCA strategy and competition director Christopher Woolard said: "Together with the ban on exit fees in future contracts, we are proposing a 1% cap on exit charges in existing contracts to ensure people can access their pension pots without being deterred by charges.

"This is an important step so people feel able to access their pension savings should they wish to."

The FCA will be given both the power and duty to cap exit fees by the UK Parliament once the relevant section in the Bank of England and Financial Services Act 2016 becomes law. This aims to ensure that consumers can access the government’s pension reforms easily and affordably.