COBS 19.6A Restrictions on early exit charges in personal pension schemes and stakeholder pension schemes1

1This section applies to an operator of a personal pension scheme or a stakeholder pension scheme.

This section does not apply to any charge which is excluded from the scope of section 137FBB of the Act by the Financial Services and Markets Act 2000 (Early Exit Pensions Charges) Regulations 2016 (SI 2016/1079).

1. (1)

   A firm must not:

   1. (a)

      impose; or

   2. (b)

      include in the arrangements relating to a personal pension scheme or stakeholder pension scheme any provision for the imposition of:

   an early exit charge on a member of the scheme.

2. (2)

   This rule applies in relation to a member who entered into a contract or other arrangement on or after 31 March 2017 providing for:

   1. (a)

      a right to benefits resulting from contributions to the scheme; or

   2. (b)

      an increment to benefits resulting from contributions to the scheme, but only in respect of the member’s benefits under that contract or other arrangement.

1. (1)

   A firm must not impose an early exit charge on a member of a personal pension scheme or stakeholder pension scheme that exceeds the lower of:

   1. (a)

      1% of the value of the member’s benefits being taken, converted or transferred; or

   2. (b)

      such lower amount as was provided for under the scheme arrangements as at 31 March 2017; or

   3. (c)

      where no such provision was made, no charge.

2. (2)

   A firm must not:

   1. (a)

      include provision in such a scheme for an early exit charge, where such provision did not exist on 31 March 2017; or

   2. (b)

      vary provision for an early exit charge in such a scheme to increase or potentially increase the charge.

3. (3)

   The value of the member’s benefits in (1)(a):

   1. (a)

      is calculated at the point when the firm receives confirmation from the member of the instruction to take the action giving rise to the early exit charge;

   2. (b)

      excludes an increment to member’s benefits resulting from contributions to a scheme under a contract or other arrangement entered into by the member on or after 31 March 2017;

   3. (c)

      excludes adjustments referred to, and satisfying the conditions in Regulation 3 of the Financial Services and Markets Act 2000 (Early Exit Pensions Charges) Regulations 2016 (SI 2016/1079); and

   4. (d)

      does not exclude adjustments referred to in Regulation 4 of the Financial Services and Markets Act 2000 (Early Exit Pensions Charges) Regulations 2016 (SI 2016/1079).

4. (4)

   This rule applies in relation to a member who entered into a contract or other arrangement (providing for a right to benefits resulting from contributions to the scheme) before 31 March 2017.