The government has announced it will set the charges cap for workplace pensions at 0.75%.
The proposal for the cap on pension charges was part of the Department of Work and Pensions’ consultation into charges on workplace pension schemes, which opened in October 2013 and closed in November 2013.
The government has also set out equivalent caps for pension schemes with combination charge structures.
Three different categories of pension charges will be banned altogether. The are:
- Payments for sales commissions that are deducted from members’ pensions.
- Charge hikes when people are no longer employed by an organisation, but leave money in the employer’s pension scheme.
- Consultancy charges, where members have to pay for advice given to their employer.
In addition, the government has announced there will be tough new rules to make sure that all of the hidden ‘transaction’ costs in pension schemes are published, and it will then consider whether these should also be included in the new charge cap.
An independent audit of pre-2001 and high-charging pension schemes is due to be completed by the end of the year. The government will consider whether further action to protect scheme members is necessary following that review.
Steve Webb (pictured), pensions minister, said: “Through the new measures, this government will be the first to get an iron grip on pension charges. We are going to put charges in a vice, and we will tighten the pressure, year after year.
“Over the next ten years, the new charge cap will transfer £200 million from the profits of the pensions industry to the pockets of savers. Pension savers have paid too much, for too long. It is time to put the saver first.”