Advisers have ridiculed the recent political pressure on pension charges, saying it exposes a lack of knowledge among MPs of the actual fees most people are paying.
Last week, as part of his attack on “rip-off Britain”, Labour leader Ed Miliband (pictured) said if charges do not start to fall, he would push for them to be capped but he gave no indication of what he would consider an acceptable charge or the type of charges that concern him.
A Parliamentary motion calling for urgent action to drive down charges has been signed by 48 MPs, 43 of them Labour, in just over a week.
Anand Associates managing director Bhupinder Anand says in cash terms, over the life of a pension, charges can look high but they need to be seen in context. He says: “It might look like a lot but it is still only a small percentage of the total fund. I wonder if Miliband has an IFA. If he does, he should sit down with them before making such ridiculous and naive statements which just undermine confidence in pension saving.”
Bloomsbury Financial Planning certified financial planner Robert Lockie says basic, run it-yourself pension wrappers are already available at low rates and more expensive ones offer greater choice and more expert input.
He agrees with The Pensions Regulator that capping costs would reduce choice.
He says: “The problem is, what would he cap? If the costs were all bundled up like with a stakeholder pension, the idea might make sense but they are not. Fees are paid to fund managers, advisers, providers and the rest of it. It is unworkable.”
Miliband says up to 16 levies or fees are applicable to private pensions and he wants people to know exactly how much they are being charged.
Lockie says: “It is not the cost of pensions that is putting people off. It is duff advice, complexity, poor returns over the past 10 years and the fact people have to wait so long until they see the money again.”