MINISTER Steve Webb has announced that a cap on pension charges for workplace pensions will not be announced until at least April 2015, a year later than planned.
The government is seeking to give employers at least 12 months to prepare for changes to the way auto-enrolment pensions are provided, Webb said in a written statement yesterday. “We remain strongly minded to cap pension scheme charges in the default funds used for automatic enrolment,” he said, adding that the timing of changes had been raised by industry experts during the consultation process.
Peter McDonald, pensions partner at PwC, said the government must provide further clarity on pensions arrangements so that employers can ensure their staff get value for money. “It is important that people working for the 22,000 small and medium-sized employers who are set to auto enrol in April this year don’t lose out from the delay,” he said. “For someone with a £100,000 pension pot in a scheme with an annual management charge of 1.5 per cent this could mean losing out on £750 in the next year, plus future returns on this lost money, before seeing charges capped at say 0.75 per cent next year.”
The government is working on a plan to cap the charges on workplace pensions that providers can demand from employees. The industry has submitted its thoughts to a government consultation, with Legal & General suggesting the cap should be set as low as 0.5 per cent in a move that was out of step with the rest of the industry.