Pension fees cap 'could be delayed'

Salisbury Journal: Steve Webb has previously promised a 'full frontal assault' on pension fees Steve Webb has previously promised a 'full frontal assault' on pension fees

The Government may delay plans for a cap on pension charges for at least a year, according to reports.

Pensions Minister Steve Webb has previously promised a "full frontal assault" on pension fees and the Government unveiled plans last year to cap the the annual charge for managing a pension pot at around 0.75% to 1%.

The proposals were announced amid concerns that people are at risk of being placed into pensions with high fees which will eat away at their savings and wipe thousands of pounds off their eventual retirement income. A consultation paper, which received 166 responses, was launched, with an expected start date from April.

But a Financial Times report suggested that that the cap would not come into place this year.

The Department for Work and Pensions (DWP) said it is continuing to look at the evidence. The Government has previously said that any final cap could lie somewhere between the two levels suggested.

A DWP spokeswoman said: "This is an important and complex consultation that requires our proper consideration to ensure we get it right and we will confirm a publication date in due course."

The Government's automatic enrolment drive, which started in 2012 with larger firms, will eventually create up to nine million people newly saving into a pension or saving more.

Concerns have been raised that as smaller firms with less experience of pensions are brought into the reforms, they will be at a greater risk of placing workers into old and high-charging schemes. Charges in schemes set up before 2001 are around 26% higher than those set up since.

Ros Altmann, an independent pensions expert and a former Downing Street adviser, said that delaying the charge cap would be a "sensible decision".

She said: " April 2014 would have been too soon, as it would have effectively punished employers who selected their scheme in good time ahead of their 2014 staging date and required many to renegotiate their arrangements.

"Auto-enrolment is a huge headache for most firms and employers do need to prepare early. That means giving fair notice of such fundamental changes."

Dr Altmann said that perhaps signalling a cap starting in 2015 would help to ensure providers adjust their pricing structures to prepare for the new policy without interfering with scheme choices already made.

Pensions provider Hargreaves Lansdown, also said a delay would be welcome, saying the argument in favour of introducing a charge cap now was "poorly made" .

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