In January, the government announced plans for a cap on early termination (or ‘exit’) charges for people accessing their retirement savings from age 55. The vast majority of Aviva and Friends Life policies do not have early termination charges and therefore most of our customers are not impacted.
We expect the regulators to introduce a cap on early termination charges next year, but in the meantime as a gesture of goodwill, we have capped our charges at 5%.
The cap applies to customers:
- with a pension policy subject to an early termination charge over 5%
- aged 55 or over who withdraw or transfer their savings early.
What sort of policies will have early termination charges?
Early termination charges were only ever common on pension policies sold before 2001. If your policy started after this date it is unlikely that early termination charges will apply.
When could early termination charges apply?
Early termination charges should only apply if you take your pension savings earlier than the date agreed when your policy was set up. They do not apply on death but may apply if you transfer to another pension or take your pension savings early.
How will I know if an early termination charge applies to my policy?
Your policy terms and conditions will specify if and when an early termination charge may apply. If the terms and conditions do not contain an early termination charge it will not apply to you.
If a termination charge is shown in your terms and conditions, it may be applied if you decide to withdraw or transfer your pension savings early. It is more likely that an early termination charge cap will be relevant to you if:
- you have only paid a small number of regular contributions which stopped shortly after your policy was set up, or
- you have recently increased your regular contributions, or
- you have recently paid in a single contribution or transferred savings from another policy.