Commenting on this morning’s news that Steve Webb, pensions minister, has confirmed the government is delaying plans to protect millions of workers from high pension fees by capping charges, Malcolm McLean, consultant, says:
“Today’s announcement that a cap on charges for funds used by workers being automatically enrolled into company pensions will be introduced afterall, but not until April 2015, removes some of the uncertainty surrounding this issue.
"Firstly this is good news in that the government appears to have accepted that any such cap cannot be introduced more immediately whilst many employers are in the middle of organising their auto-enrolment arrangements.
“We still do not know, of course, at what level this cap is to be fixed, and exactly what it is expected to cover, eg. transaction charges, but it is hoped it will not be so low as to stifle innovation and create a “race to the bottom”. A figure of between 0.75% and 1% would appear to be appropriate, with a need for full transparency to enable employers to decide upon and secure the best terms for their employees.
“In relation to legacy arrangements, including those schemes who must enroll their staff between now and April 2015, there probably needs to be a further period of grace, perhaps three years, to allow schemes time to adjust to the new cap.”