An end to rip-off pension charges: Webb
28 Mar 2014 02:19 PM
Tough new measures announced by Pensions
Minister Steve Webb yesterday will ensure pension schemes deliver value for
money for savers.
They will end rip-off charges and ban hidden costs,
helping people build up the best retirement income possible from their
savings.
From April 2015 a 0.75% cap on charges will be
introduced for the default funds of all qualifying schemes.
Over the next 10 years, the government estimates that an
extra £195 million of pension contributions will turn into pension
savings, as part of a fairer society, rather than being swallowed up by
unnecessary costs and charges.
An
individual earning £20,000 would save around £35,500 over their
lifetime if they saved in a scheme with a 0.75% charge compared to a 1%
charge.
The
government has also set out equivalent caps for schemes with combination charge
structures.
Three different categories of pension charge will be
banned altogether:
- payments for sales commission which are deducted from
members’ pensions
- charge hikes when people are no longer employed by a
company but leave money in the company’s pension scheme
- ‘consultancy charges’ where members have to
pay for advice given to their employer
In
addition there will be tough new rules to make sure that all of the hidden
‘transaction’ costs in pension schemes are published, and the
government will then consider whether these should also be included in the new
charge cap.
An
independent audit of pre-2001 and high-charging pension schemes is due to
complete by the end of the year and the government will consider whether
further action to protect scheme members is necessary following that
review.
Steve Webb said:
Through the new measures, this government will be the
first to get an iron grip on pension charges. We are going to put charges in a
vice; and we will tighten the pressure, year-after-year.
Over the next 10 years, the new charge cap will transfer
£200 million from the profits of the pensions industry to the pockets of
savers. Pension savers have paid too much, for too long. It is time to put the
saver first.
To
build a stronger economy by 2018, 10 million workers will have been
automatically enrolled into pension saving.
The
Minister continued:
The
pensions revolution does not stop at automatic enrolment. People need to have
confidence that putting money into good pension schemes where their money will
be looked after.
The
measures we are announcing today will make sure that we are seen as world
leaders in transparency and value for money.
The
announcement comes hot on the heels of last week’s Budget
announcement to provide the flexibility for people to choose how to
use their savings in the way that suits their personal
circumstances.
More information
Read: Better workplace pensions: further measures for
savers
The
measures were announced to Parliament yesterday.
The
government’s consultation Better workplace pensions: a consultation on
charging was published in October 2013.
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