For an average earner currently paying into a fund with a charge of 1.5%, this new cap could save them around £100,000 over the course of their working life.
Over the next decade, the default fund charge cap will transfer around £200 million from the pensions industry to savers.
Minister for Pensions Steve Webb said:
Today is an excellent day for pension savers. It is vital that workplace pension schemes are run in the interests of their members and that their hard-earned savings are not eaten away by excessive charges.
Over 5 million people have now been automatically enrolled into a workplace pension and by 2018, millions more will be saving for the first time, or saving more. This is why we are building a pensions system that these workers can save into with confidence – and not see their money disappear in opaque charging structures.
There is an understandable buzz around what April will bring for those retiring now, with the unprecedented pension freedoms coming in. But these reforms show we are also determined to help the pensioners of tomorrow – people working hard and saving hard for their families’ future.
Regulations are being laid today alongside the government’s response to its consultation Better workplace pensions: Putting savers’ interests first.
The Financial Conduct Authority will also be making corresponding rules to control charges and introducing Independent Governance Committees for workplace personal pension schemes from April 2015.
Their rules, together with today’s regulations, will ensure that savers are protected regardless of the type of workplace pension they are saving into.
Subject to Parliamentary approval, these draft regulations will be a major step towards ensuring a positive outcome for millions of people in retirement.
The next stage of the government’s work to ensure full disclosure of costs and charges throughout the value chain is also set out in today’s paper – with the plan to publish a joint call for evidence with the Financial Conduct Authority in spring 2015.
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