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Support for pension fee cap proposals

Published on 31 October 2013 02:00 PM

Government plans to force a limit on pension fees have received initial support from those backing the interests of savers.

The proposed move is part of a clampdown on 'rip-off' charges which can reportedly reduce the size of a person's retirement pot by thousands of pounds.

 

A new consultation aims to outlaw providers from fixing their fee for overseeing a pension pot at over 0.75% a year.

Ministers want providers to spell out their charges clearly

It comes amid concerns that pension savers are in danger of being put in poor value schemes, as landmark reforms to persuade workers to begin putting cash towards their retirement roll out.

Ministers want providers to spell out their charges clearly to prevent hiding their fees outside any limit.

The Government wants to help pension savers retain their trust in the system by flushing out any bad practice.

It is also considering putting an end to 'active member discounts' - where adults who have ceased paying into a pension, maybe due to changing jobs, find the charges for running their pot increase.

On average, pension savers see their annual fee hiked by about half a percentage point under this practice.

'We welcome moves to impose a cap on auto-enrolment charges'

Just adding a fraction of a percentage point to a yearly fee can wipe tens of thousands of pounds off the final size of the pot an older person will end up with.

Other caps being considered include a higher charge cap of 1% and a 'two-tier' cap.

The latter would involve a standard cap of 0.75% and a higher cap of 1% if firms explain to the Pensions Regulator why their scheme charges more than 0.75%.

Caroline Abrahams, Charity Director for Age UK, said: 'We welcome moves to impose a cap on auto-enrolment charges.

‘It means savers can be more confident they are being enrolled in a good value scheme.

‘We hope that this move will also increase pressure on older schemes to become more competitive so that everyone can get the best value from their savings.'

Copyright Press Association 2013


Last updated: Oct 06 2017

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