Ministers are reportedly mulling a decision to dilute the 0.75 per cent cap on annual management fees, which would leave UK retirement savers vulnerable to high charges.
The cap, put in place in 2016, protects employees who are auto-enrolled into their pensions from having their retirement pot eaten into by higher charges.
It comes as chancellor Rishi Sunak is looking to tap cash in a bid to fund new infrastructure, such as renewable energy projects.
Sunak is expected to outline his policy initiatives in the October 27 Budget, which should see capital being poured towards prime minister Boris Johnson’s ‘levelling up’ agenda.
The proposal to change the charge ceiling would be subject to consultation but would also see the Treasury encourage defined contribution pension funds to broaden their investment horizons if not confined by the cap, the Financial Times reported, citing government insiders.
It could see an increasing number of pension managers turn towards private equity and venture capital funds.
Though the move would come six months after the Department for Work and Pensions refused performance fees to be partially or completely excluded from the cap following a consultation.
Both Sunak and the secretary of state for work and pensions Therese Coffey now argue that their proposals will allow pension savers greater returns – with and without the cap.
However, the government sources explained that performance would not be scrapped entirely, but that the consultation will “seek a balance” between savings and infrastructure investments.