Ever felt stuck in a financial product you no longer want or need, because getting out would cost you a fortune?

You’re not alone.

Whether it’s an investment platform, pension product, or insurance policy, many consumers find themselves tied into long-term financial commitments thanks to steep termination and exit fees. These charges often fly under the radar when people sign up, but they can become a real barrier to making better financial decisions down the line.

What Are Termination and Exit Fees?

Termination and exit fees are charges imposed when you end a contract early. They’re especially common in financial products like pensions, investments, and life insurance. These fees might be:

• A flat charge
• A percentage of your account value
• Or a declining scale that reduces over time

They’re usually justified by providers as a way to cover administrative costs or recoup the commissions paid to advisers when the product was first sold. But in reality, they often serve one main purpose: keeping you locked in.

Why Companies Use These Fees

There are three main reasons providers use termination and exit fees:

1. To recover costs – Including setup and early advice costs.
2. To protect revenue – Providers plan on keeping you (and your money) for a set period.
3. To discourage exits – If leaving is expensive, fewer people will do it.

While these might make sense from the provider’s side, for consumers, it often feels like a trap.

The Real Impact on Consumers

• You pay more to leave than you would ever expect to gain by switching to a better option.
• You lose flexibility even when your circumstances change, the cost of leaving makes it feel impossible.
• You feel stuck, knowing that better opportunities exist but can’t be accessed without a financial penalty.

In many cases, the fee isn’t just inconvenient, it’s enough to stop people from making moves that are clearly in their best interests.

What Do Regulators Say?

Regulators are aware of the issue, but change has been slow.

In the UK, the Financial Conduct Authority (FCA) decided in 2023 not to ban exit fees altogether, but instead to focus on “fair value.” That means fees need to reflect real costs, not act as profit generators or roadblocks. The FCA’s 2025 Consumer Duty framework also puts pressure on firms to deliver good outcomes, which includes fair contract terms.

“Unreasonable exit charges are unlikely to offer fair value,” the FCA notes.
 Source: https://www.moneymarketing.co.uk/news/fca-rules-out-banning-exit-fees/

Other regulators are watching closely, particularly in markets like Ireland and the Netherlands, where transparency in financial products has become a bigger focus in recent years.

What You Can Do

If you’re considering a financial product or looking to leave one, it’s important to be proactive:

1. Ask the right questions: How much will it cost to exit early? How long are you tied in?
2. Look for flexibility: Products that allow penalty-free switching or partial withdrawals are usually a better long-term fit.
3. Get advice: Speak to a cross-border financial adviser (like us!) who can help you compare products and understand hidden costs.

Termination and exit fees are one of the most common ways financial products keep people tied down. Financial planning should give you freedom, not lock you in.

That’s why we work with clients to create strategies that give you more control over your money, not less.

Thinking about making a change? Let’s talk.

Sources

• Financial Conduct Authority (FCA) on exit fees and Consumer Duty (2023)
• FCA Consumer Duty – Final guidance, requirements on fair value
• European Insurance and Occupational Pensions Authority (EIOPA) guidelines on contract complexity and transparency
• Central Bank of Ireland on switching and product lock-in