Low cap on workplace pension fees will hurt small businesses

A LEADING pensions provider has called on the government to cap management fees on workplace pensions at 0.5 per cent, in a move out of step with the wider industry.

Legal & General made the comments as part of a consultation into pension fees, which ended yesterday.

“These look like tiny slivers of money, fractions of a per cent,” corporate affairs director John Godfrey said. “But over a 25 or 30 year period they add up to an awful lot of money. We’re talking about many thousands of pounds.”

He added that most people want a simple and reliable pension, and that providers should be able to offer schemes at 0.5 per cent if they make use of economies of scale.

However, warnings have been issued about passing charges on to small business owners if providers are pushed to set a lower cap on management fees.

Tom McPhail, head of pensions research at Hargreaves Lansdown said: “If you impose a price cap, you don’t make the costs disappear, you just push them somewhere else.

“A price cap lower than one per cent would cause hundreds of thousands of small businesses and entrepreneurs to have to pay additional costs towards the setting up of their workplace pension.”

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