However, ignoring the contractual terms looks the likely interpretation the FCA has assumed in the consultation paper as citing an expected increase in exits of 24.7 per cent and a loss of revenue for the industry of between £46m-£89m, from both capping charges for those who were always going to exit, but also the cost of those new exits as well. The implementation costs are £17m.

The consultation paper has tackled the issue of market value adjustments in relation to exit penalties to ensure policyholders who choose not to transfer are not disadvantaged.

A cap on exit charges will no doubt be of benefit to some customers, and may incentivise more to transfer and shop around when accessing the new freedoms. However, as with many things, this is not a straightforward issue. We now watch with interest to see how the definition of ‘value’ pans out in the exit penalty debate and who, if anybody, stands to benefit or lose as a result of its implementation.

Andrew Pennie is head of pathways at Intelligent Pensions