Insurers warn over Government cap on pension plan charges

But 0.75 per cent limit is welcomed by consumer groups and advisers

The planned cap on charges on workplace pensions will drive small schemes out of business and give workers less financial freedom, insurers warned yesterday.

The announcement by the pensions minister Steve Webb that a charge cap of 0.75 per cent will be introduced for auto-enrolment workplace schemes from April 2015 prompted anger in the industry.

Mr Webb promised: “We are going to put charges in a vice – and we will tighten the pressure year after year.”

But Kevin LeGrand, the head of pensions policy at Buck Consultants, said: “If the pensions charge cap becomes too tight, something may have to give. The outcome may be to increase the pace of the current trend to drive small and bespoke schemes into oblivion, resulting in all workplace pension provision being at the lowest common denominator level.”

The Department for Work and Pensions had consulted the industry and consumer groups on whether a cap should be introduced – and, if so, whether it should be set at 0.75 per cent or 1 per cent. Mr Webb has long made it clear that he favoured a cap on charges, so it seemed inevitable that it would be brought in.

As well as the cap on fees, the Government said it will ban sales commission being deducted from pensions, outlaw increases in charges for those who leave a company but remain in the pension scheme, and ban charges for advice given to employers by a pension provider.

The cap was welcomed by consumer groups such as Which?, which pointed out that paying a 1 per cent rather than 0.75 per cent annual charge could cost a saver nearly £40,000 over their working life.

Tom McPhail, the head of pensions research at Hargreaves Lansdown, also welcomed the move, saying: “It is vital that pension scheme members have confidence that their workplace pension will give them good value for money. The charges cap addresses that issue and means that even if they can’t afford a Lamborghini at retirement, at least pension investors won’t be helping to pay for the fund managers’ new sports cars.”

But the moves left several senior providers disappointed. Malcolm McLean, a senior consultant at Barnett Waddingham, said: “A 0.75 per cent cap will obviously limit the ability of employers to choose a scheme that may well have higher charges but delivers far better outcomes for their staff. On the commission ban, this will be seen as a huge blow to advisers, which some estimates suggest could cost them £150m and 1,000 jobs.”

Darren Philp at The People’s Pension said: “The Government has missed a huge opportunity with this consultation. Instead of cleaning up pensions, it has sanctioned more complexity that will just create more confusion.”

However Philip Smith, a director in the defined-contribution team at the accountants PwC, added: “A cap ... is another important step towards simpler and more transparent pension schemes and should go a long way to help rebuild trust in pensions as a long-term savings tool.”

PROMOTED VIDEO
News
Lane Del Rey performing on the Pyramid Stage at Glastonbury 2014
people... but none of them helped me get a record deal, insists Lana Del Rey
Arts and Entertainment
Dwayne 'The Rock' Johnson stars in Hercules
filmReview: The Rock is a muscular Davy Crockett in this preposterous film, says Geoffrey Macnab
News
i100
Arts and Entertainment
British author Howard Jacobson has been long-listed for the Man Booker Prize
books
Life and Style
tech
Arts and Entertainment
Standing the test of time: Michael J Fox and Christopher Lloyd in 'Back to the Future'
filmA cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
Sport
Louis van Gaal watches over Nani
transfers
Arts and Entertainment
Flora Spencer-Longhurst as Lavinia, William Houston as Titus Andronicus and Dyfan Dwyfor as Lucius
theatreThe Shakespeare play that proved too much for more than 100 people
News
exclusivePunk icon Viv Albertine on Sid Vicious, complacent white men, and why free love led to rape
Sport
New Real Madrid signing James Rodríguez with club president Florentino Perez
transfersColombian World Cup star completes £63m move to Spain
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Arts and Entertainment
Stir crazy: Noel Fielding in 'Luxury Comedy 2: Tales from Painted Hawaii'
comedyAs ‘Luxury Comedy’ returns, Noel Fielding on why mainstream success scares him and what the future holds for 'The Boosh'
Life and Style
Flow chart: Karl Landsteiner discovered blood types in 1900, yet scientists have still not come up with an explanation for their existence
lifeAll of us have one. Yet even now, it’s a matter of debate what they’re for
Arts and Entertainment
'Weird Al' Yankovic, or Alfred Matthew, at the 2014 Los Angeles Film Festival Screening of
musicHis latest video is an ode to good grammar. But what do our experts think he’s missed out?
Travel
Hotel Tour d’Auvergne in Paris launches pay-what-you-want
travelIt seems fraught with financial risk, but the policy has its benefits
Arts and Entertainment
booksThe best children's books for this summer
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Insight Analyst – Permanent – Up to £40k – North London

£35000 - £40000 Per Annum plus 23 days holiday and pension scheme: Clearwater ...

Business Analyst - Banking - Scotland - £380-£480

£380 - £480 per day: Orgtel: Business Analyst - Banking - Edinburgh - £380 - ...

Risk Analyst - (Multi Asset class) £70k - £80k

£70000 - £80000 per annum: Harrington Starr: My client is a leading financial ...

Programme Director - Conduct Risk - London

£850 - £950 per day: Orgtel: Programme Director - Conduct Risk - Banking - £85...

Day In a Page

Noel Fielding's 'Luxury Comedy': A land of the outright bizarre

Noel Fielding's 'Luxury Comedy'

A land of the outright bizarre
What are the worst 'Word Crimes'?

What are the worst 'Word Crimes'?

‘Weird Al’ Yankovic's latest video is an ode to good grammar. But what do The Independent’s experts think he’s missed out?
Can Secret Cinema sell 80,000 'Back to the Future' tickets?

The worst kept secret in cinema

A cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
Facebook: The new hatched, matched and dispatched

The new hatched, matched and dispatched

Family events used to be marked in the personal columns. But now Facebook has usurped the ‘Births, Deaths and Marriages’ announcements
Why do we have blood types?

Are you my type?

All of us have one but probably never wondered why. Yet even now, a century after blood types were discovered, it’s a matter of debate what they’re for
Honesty box hotels: You decide how much you pay

Honesty box hotels

Five hotels in Paris now allow guests to pay only what they think their stay was worth. It seems fraught with financial risk, but the honesty policy has its benefit
Commonwealth Games 2014: Why weight of pressure rests easy on Michael Jamieson’s shoulders

Michael Jamieson: Why weight of pressure rests easy on his shoulders

The Scottish swimmer is ready for ‘the biggest race of my life’ at the Commonwealth Games
Some are reformed drug addicts. Some are single mums. All are on benefits. But now these so-called 'scroungers’ are fighting back

The 'scroungers’ fight back

The welfare claimants battling to alter stereotypes
Amazing video shows Nasa 'flame extinguishment experiment' in action

Fireballs in space

Amazing video shows Nasa's 'flame extinguishment experiment' in action
A Bible for billionaires

A Bible for billionaires

Find out why America's richest men are reading John Brookes
Paranoid parenting is on the rise - and our children are suffering because of it

Paranoid parenting is on the rise

And our children are suffering because of it
For sale: Island where the Magna Carta was sealed

Magna Carta Island goes on sale

Yours for a cool £4m
Phone hacking scandal special report: The slide into crime at the 'News of the World'

The hacker's tale: the slide into crime at the 'News of the World'

Glenn Mulcaire was jailed for six months for intercepting phone messages. James Hanning tells his story in a new book. This is an extract
We flinch, but there are degrees of paedophilia

We flinch, but there are degrees of paedophilia

Child abusers are not all the same, yet the idea of treating them differently in relation to the severity of their crimes has somehow become controversial
The truth about conspiracy theories is that some require considering

The truth about conspiracy theories is that some require considering

For instance, did Isis kill the Israeli teenagers to trigger a war, asks Patrick Cockburn