30.10.13
Treasury consulting on 0.75% pension fee cap
Pension fees will be legally capped, ministers have announced. Three options have been set out: a 1% charge of funds under management, a 0.75% cap, or a two-tier cap where 0.75% is the standard and employers would have to explain to the Pensions Regulator why the charges should exceed this.
It is a lower cap than had previously been suggested, and comes as the Office of Fair Trading estimated that more than 186,000 pensions are currently subject to an annual charge of above 1%. These charges can consumer as much as half of a workers’ retirement savings, the government said, with older workers most exposed to the costs.
Financial secretary to the Treasury, Sajid Javid, said: “The government is determined to help hard working families and that includes making sure someone’s saving will deliver the biggest possible returns and not be eaten away at by a variety of charges and fees.
“As part of this plan, we will bring forward significant change to the pensions sector including a cap on certain charges, which should save many individuals tens of thousands of pounds.”
Pensions minister Steve Webb said: “The government believes that enough is enough on charges. People need to know they are getting value for money when they save into a pension and not being ripped off by excessive charges. We are consulting on a cap on pension charges. A range of options will be on the table including an outright ban on all charges above 0.75% per year.
“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.”
The consultation closes on November 28.
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