Government delays cap on pension charges by at least a year

The pensions minister Steve Webb announced today  that it would be "only right and fair to give employers a minimum of 12 months' notice of the changes".

The cap, of as little as 0.75% a year on pension savings, was to have been applied from April this year.

The pensions minister said:

"Nothing in the response to our consultation has changed our view that action is needed to ensure people are not ripped off by excessive pension charges."

Simon Foster, Head of Corporate Life and Pensions, UK and International Savings, Zurich, said:

"It is essential that we get the right answer for employees, rather than just a quick answer, if we are to re-build public confidence in pensions and help savers reach the retirement incomes they need. While this delay will create uncertainty for both the industry and pension schemes in the short term, it should allow schemes the opportunity to plan ahead. We are pleased to see emphasis on planning a sensible transition for pre-2015 schemes in the Minister's remarks today.

"We think the best way of ensuring good value for employees is to have strong systems of governance that are designed to put customers' interests at the centre of decision making. But with a major change like the introduction of auto-enrolment, consumers will be looking for even more assurance about their savings. This is why we support a charge cap of 0.75 per cent, with the option to go to 1 per cent only if there is clear proof that they are delivering additional value to employees."

Adrian Boulding, Pensions Strategy Director at Legal & General, commented:

"Last year we laid down a benchmark, declaring that a company pension scheme member investing in our default fund should not have to pay more than half a per cent a year in charges for auto-enrolment. We calculated that would save over £4bn in charges. That’s exactly what we are offering to employers staging with us in 2014 and to existing customers moving across to our latest Workplace Pension platform for auto enrolment.

"Legal & General will continue to hold the torch for low charges going forward. In the light of today’s announcement by the Pensions Minister, we would urge all employers with existing schemes to join us in rooting out high or unfair charges. Legacy schemes with high charges or schemes with unfair 'Active Member Discounts' can cause major damage to employees’ retirement savings if employers just let this opportunity drift.”