Government seeks to force companies to offer full pension freedoms
Senior ministers have been very vocal about their disappointment with the industry's inability to instigate change sooner
The treasury has launched an immediate consultation on how to remove the barriers which are stopping pension holders from accessing their money before they choose to retire.
The main issues to be investigated include the excessive penalties for early exit and the potential to impose a legislative cap on this, and how to improve the transfer from one pension scheme to another.
Reforms allowing savers to access their entire pension pot from the age of 55 came into effect in April 2015, but many pension scheme providers have been unable to deliver the flexibility promised by the government.
Patrick Connolly, a certified financial planner at Chase de Vere, has welcomed the government's move and thinks that it is necessary to empower consumers.
He commented: 'While only a relatively small number of pension policies impose excessive penalties, these need to be eradicated entirely if we want to continue to build public trust in pensions.
'In a free market providers should have the right to decide which options and flexibilities to include in their products, but in the interests of treating customers fairly, they shouldn't then impose high penalties if their customers decide to move elsewhere.'
The Chancellor of the Exchequer, George Osborne, Ian Duncan Smith, secretary for work and pensions and Ros Altman, the minister for work and pensions, have all recently been very vocal about pension providers' failure to initiate change a faster rate.
Altman commented: 'I find it disappointing that even the larger pension companies are not allowing their customers to take advantage of the new freedoms that the Government has introduced for them.
'The industry has had over a year to prepare for the changes - and it is encouraging that some firms have risen to the challenge. But others seem to be failing to move with the times and are still acting as if nothing has changed.'
Altman and Harriet Baldwin, economic secretary to the treasury, have also asked the financial conduct authority and the pension regulator to gather information on the charges that savers currently face across the industry.
The consultation will run in tandem with an online survey. The government's response is expected to be published in autumn.
Binyamin Ali is assistant editor of Private Client Adviser