The Association of British Insurers has missed the DWP’s deadline for responding to the pension charge cap consultation as its members battle over the inclusion of legacy schemes.
Last month, the Department for Work and Pensions revealed three options for capping charges on automatic enrolment default funds.
The DWP is consulting on a charge cap of 1 per cent, 0.75 per cent or a two-tier “comply or explain” cap, with responses due on 28 November (yesterday). However, the ABI says it will not submit its response until early next week.
An ABI spokeswoman says: “We have agreed with DWP that we will submit our response early next week. Emphasis will be on finding a way forward that minimises the risk of disruption to auto-enrolment and the OFT programme of reform.
“We are currently finalising the details with our members. This is a complex consultation with a short deadline.
Legal & General pensions strategy director Adrian Boulding says the delay has come about because rival providers have been unable to agree on whether existing pension arrangements should be included in the charge cap.
He says: “This is all about legacy and the L&G view that existing pension schemes should be able to enjoy the 0.5 per cent charge level that is widely available for new pension schemes.
“We are morally uncomfortable with the concept that an employer buying new in the market gets one price but an employer that has already bought and is a loyal customer is getting a worse deal for their staff.
“We are pushing very hard to say there should be a charge cap of 0.5 per cent and it should apply to new schemes and existing schemes, and we should ban the egregious active member discounts for new schemes and existing schemes.
“The problem is our pro-consumer stance is not shared by others around the ABI table. Others are saying they don’t want to give up profit margins on earlier business or that it will take too long to transition, so they want to leave legacy business on high charges.
“We are morally very uncomfortable about that, so as a result it has taken the ABI longer than usual to craft a response that reflect the views of all of its members.”
Earlier this week, Money Marketing revealed the Government was coming under pressure from insurers to delay introducing a charge cap for existing pension schemes for three years due to concerns it will disrupt automatic enrolment.
A DWP spokeswoman says: “DWP have been engaging with ABI and their members throughout the charges consultation period.
“We understand that large representative organisations have to undertake internal approval processes so we wanted to be pragmatic and look forward to receiving the ABI response on Monday.”