Pension charges cap proposed by the Government – Company Formations, England
Plans to cap pension scheme charges to help people save more towards retirement are to be brought forward, the Government has confirmed.
Under the proposals, a cap of 0.75 per cent of the funds under management could be placed on the charges of defined contribution workplace pension schemes – a move that could boost an individual’s pension pot by hundreds of thousands of pounds.
The government described it as a ‘crucial step’ in improving value for pension consumers following the introduction of auto-enrolment.
Up to nine million people are expected to open a pension as part of the automatic enrolment of eligible workers into a pension scheme, increasing the total amount saved into workplace pensions by around £11 billion per year.
Although the average charge on new pension schemes is around 0.51 per cent, the Office of Fair Trading estimates that there are over 186,000 pensions worth a total £2.65 billion that are subject to an annual charge of over one per cent.
Minister for pensions Steve Webb said “enough is enough” on charges. He continued: “People need to know they are getting value for money when they save into a pension and not being ripped off by excessive charges.”
The Government is seeking industry and public opinion into the proposed caps as part of a consultation which will run until 28 November.
Webb added: “I’m confident that we will make the system fairer for anyone being automatically enrolled into a workplace pension and will finally address the issue of charges which has been neglected for far too long.”