A decision has been made to defer a price cap on workplace pensions until April 2015, pensions minister Steve Webb has announced at a CBI pensions conference.
The decision has not come as a surprise to the industry and many believe that the change is showing the government’s commitment to ensuring auto-enrolment is a success.
Adrian Boulding, Pensions Strategy Director at Legal & General, commented:
“Last year we laid down a benchmark, declaring that a company pension scheme member investing in our default fund should not have to pay more than half a per cent a year in charges for auto-enrolment.
We calculated that would save over £4bn in charges. That’s exactly what we are offering to employers staging with us in 2014 and to existing customers moving across to our latest Workplace Pension platform for auto enrolment.
Legal & General will continue to hold the torch for low charges going forward.
In the light of today’s announcement by the Pensions Minister, we would urge all employers with existing schemes to join us in rooting out high or unfair charges.
Legacy schemes with high charges or schemes with unfair “Active Member Discounts” can cause major damage to employees’ retirement savings if employers just let this opportunity drift.”
Aviva’s Head of Policy John Lawson said:
“Giving consumers good value when saving for retirement has to be our number one priority. If that means government and the industry need to take more time to consider the best solutions, then we should take it - the consequences of getting this wrong are serious.
“Steve Webb has signalled his support for a pension charge cap, which will give employees confidence that they will get a fair deal at time when many will be saving for the first time through automatic enrolment. Employers are under pressure with the rollout of automatic enrolment - giving them some certainty that any charge caps will apply from 2015 gives them time to prepare.
“In 2012 Aviva committed to only auto-enrol employees into low cost, modern schemes with an average total charge of less than 1% per annum. But this is not only about charges, it’s right the government also looks deep into areas such as governance, scheme quality and improved transparency, as the OFT has been doing, to ensure we get a balanced outcome.
“We will continue to work closely with the industry and government on this critical issue.”
Neil Carberry, CBI Director for Employment and Skills, said:
"The Government has listened to business concerns about the impact of a charge cap announcement at short notice.
"What we now need is a system that ensures choice for companies trying to do the best for their staff.”
Angela Seymour Jackson, Aegon’s Managing Director of Workplace Solutions said:
“Making a success of auto-enrolment is Aegon’s and the Government’s top priority. The decision to defer introducing any price restrictions until April 2015 supports this. It will allow employers and providers to get on with enrolling many thousands of employees into workplace schemes, often for the first time. Rushing new scheme conditions through at this critical stage would have disrupted many employers’ plans to use good existing schemes. The Pensions Minister’s decision will avoid employees losing out on valuable contributions while employers made alternative arrangements.
“Aegon has already committed to participate in an industry-wide audit of existing schemes managed by an Independent Board. This will ensure all members – new and old – can have confidence they are receiving value for money from pensions.”
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