24 Jan 2014
The Government has announced that the introduction of a cap on pension charges, which was due to come into effect from April, will be postponed for ‘at least a year’.
The cap on charges would have meant that pension operators could charge no more than between 0.75% and 1% for those automatically enrolled into a pension. Currently, some older schemes can charge up to 2.3% every year in management charges.
Pensions minister, Steve Webb, who had previously declared a ‘full frontal assault’ on the charges, said that it was ‘only right and fair to give employers a minimum of 12 months’ notice of the changes’. He stressed that the Government would still act ‘to ensure people are not ripped off by excessive pension charges’.
News of the delay has been widely welcomed by the pensions industry.
John Lawson, Aviva’s head of policy, responded by saying that ‘the consequences of getting this wrong are serious’, adding that time should be taken to concentrate on getting the rules right. ‘If that means government and the industry need to take more time to consider the best solutions, then we should take it’, he said.
Yvonne Braun, head of savings retirement and social care at the Association of British Insurers (ABI) also agreed with the decision, stating that with the introduction of auto enrollment, implementing the proposed pension fees cap now could ’cause disruption’.