Scottish Life MD Ewan Smith has today commented on the Government’s consultation into pension charges, warning that a charge cap will lead to less choice for employers and will create a market where not all schemes have access to the full range of providers.
Ewan Smith commented:
“We maintain that a charge cap may have unintended consequences for scheme members and will not provide employers with the choice they need. On that basis we believe it is unnecessary and undesirable as ultimately it will become the market norm and as such halt the trend that has seen scheme charges decline sharply in recent years. The OFT raised concerns regarding a charge cap and we are disappointed to see that Government proposes introducing one. Value for money won’t come solely from capped charges but also from investment performance, which is much more difficult to predict.
“As a mutual Royal London will not sell products that are priced to generate a loss for existing members and we are concerned that the charge cap will create a market where not all schemes have access to the full range of providers.
“We are fully supportive of the removal of Active Member Discounts (AMDs), however are concerned that this will apply only on schemes that stage post April next year. This raises questions of what will be done for other schemes – there are a huge number of schemes that fall outside of this staging date. More could be done here to ensure that these hidden charges are completely banned. We want to see a strong and vibrant market and understand that changes are necessary to ensure this. We look forward to engaging with DWP during this consultation process.”
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