Holiday reading: Transfers and exit charges – consultation basics

But why, you ask, when the Pensions Regulator and the Financial Conduct Authority are already undertaking their own analyses? The document says:

The government has said that should it find evidence of "excessive" early exit charges that impede individuals' access to the pension freedoms, the prospect of a cap will be put on the table. 

Early exit charges

The definition and prevalence of exit charges, along with a judgment on what a "disproportionate" charge might look like, are the key areas of focus here. The document states: 

The range of pension scheme types and the rules attached to them could cause hiccups in finding a one-stop solution for exit charges, and the government has said a statutory cap "should only be taken as a proportionate means of achieving a legitimate objective in accordance with the public interest".

But should the findings contain evidence in favour of some sort of policy intervention, the government has put forward three possible options:

• A cap on all excessive early exit fees;

• A flexible cap in certain circumstances;

• A voluntary approach to restricting exit fees and charges.

The idea of a 'flexible cap' might sound like the antithesis of the simplicity the government and industry always strives for in pensions.

But no matter, here's an example to make the flexible cap concept crystal clear:

Pension transfers

This part looks at how the process can be made smoother and more efficient. As if by happy accident, the complexity of the statutory process for transferring out of a pension scheme was illustrated with a large blurry flow diagram.

But it does note the combined slowing effects of investment, legal and admin considerations, as well as trustees' obligation to establish the legitimacy of the receiving scheme. It asks:

Financial advice

The £30,000 threshold to determine who is and who isn't required to take advice in the context of a transfer is a deliberate barrier against poor decision-making by the member.

The government has described creatively those who insist on flying in the face of their adviser's wisdom and transferring anyway – dubbed here as "insistent clients". 

Such decisions create a tension with that adviser, who may be reticent to carry out the transaction in case of future redress and thus another barrier to a smooth process.

But the government points to an FCA factsheet on the matter...

... and asks: "How could the process for seeking advice in relation to safeguarded benefits be made quicker and smoother, and clearer for individuals, firms, and advisers?"

The consultation closes on October 21 and the government will analyse the findings in line with those of the the regulator and the FCA.