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David Cameron pressured over pension charge cap delay

Labour shadow Work and Pensions Secretary Rachel Reeves has written to Prime Minister David Cameron asking whether the Government has abandoned plans to cap auto-enrolment charges, the FT reports.

Reeves is pressing Downing Street over the issue after Money Marketing revealed policymakers are considering pushing the reform beyond the May 2015 general election because it is “too complicated”.

In a letter to the Prime Minister, Reeves says: “Any climb down by Government on capping rip off pension fees and charges would cost savers millions of pounds of their hard-earned retirement income.

“Reports that the Treasury and the DWP are ‘in conflict’ over a cap on pensions fees are extremely unsettling at a time when savers are losing their hard earned income.”

Pensions minister Steve Webb first revealed proposals to cap the annual management charge for automatic enrolment default funds at between 0.75 per cent and 1 per cent in October.

The cap was originally due to be implemented in April this year but was subsequently delayed until April 2015 “at the earliest” to give businesses more time to prepare for the change.

A DWP spokesman told Money Marketing last week: “We will publish our response to the consultation in due course.

“This is about more than just a cap – we will be responding on a wide range of issues, including governance, scheme quality and transparency.” 

Click here for all the latest news and analysis on the proposed charge cap 


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There are 2 comments at the moment, we would love to hear your opinion too.

  1. The thing I’d like to know, is this the proposed cap only on fund managers or does it also apply to financial advice? Maybe Steve Webb would like to clarify this point as charges are now split and it would be useful for him to articulate precisely what charges he is talking about.

    There are many businesses out there that need advice on auto enrolment but the profession is confused on how to charge due to the fact of unclear statements from the pensions and works department when talking about charges. We need clarification urgently of what the rules are going to be.

  2. goodness gracious 18th February 2014 at 12:43 pm

    If you can tell me the total charges for a typical default multi manager, passive AE approved fund you are a better man than me Gunga Din. Dont forget all fund fees including dealing costs, loan charges unpaid to fund, trustee fees and other disbursments all charged to fundholders. Add the management fees and pension provider fees and what do you get? 0.5%, 1.5%? who knows.
    Unless there is an agreed method of full fee and charges being expressed on an annual basis in arrears with every charge counted, including lost income from lending, how can you compare?
    Why not include transaction costs as charged by NEST and NOW?
    Until you can agree clarity on what is included in a charge cap, it is a non starter as the government have seen. But how would Ms Reeves know? A PPE degree and a time at the LSE does not expose you to the practices of fund management. Why not get one of your unpaid interns to find out for you Rachael, then you can realise the complexity of the situation, make some comments about how outrageous it is that firms that used to employ you make a profit, then work with others to make charging structures less opaque.

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