While we strongly support the direction of the government’s plans, we don’t believe the cap goes far enough.
There is an urgent need for better minimum standards for all workplace pensions so that employees can be confident they are being enrolled into high-quality, good-value schemes.
We are calling on pensions minister Steve Webb to do more to protect employees’ retirement funds, so we have launched the Hands off my pension campaign.
We want the government to set the proposed charge cap at 0.5%, roll out the cap to cover all new and existing workplace pensions, and ban hikes on annual management charges when an employee leaves an organisation.
We have calculated that if the new cap is set at 0.5%, rather than the proposed 0.75%, and extended to cover all new and existing workplace schemes, consumers could save about £4.8 billion over the next 10 years. This seemingly small percentage change means that an individual pension fund could be £40,500 better off, according to data from the Department for Work and Pensions.
The difference between a 0.5% and 1% cap could be a whopping £78,000. Anyone paying into a workplace pension scheme should feel confident that their money is being well looked after, not lining the pockets of a fund manager.
But in a previous investigation, we found this is not the case. One-third of employees [surveyed by Which? in March 2013] who have opted out of auto-enrolment, or have said they will opt out, did so because they do not trust the pension industry to look after their money, and one in five said it was because they are concerned about the quality of the scheme.
Richard Lloyd is executive director at Which?