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DWP hits back over pension charge cap impact assessment ruling

The Department for Work and Pensions insists its auto-enrolment charge cap plans will not be derailed after a damning report criticised its assessment of the impact the reform will have on the pensions industry.

The Regulatory Policy Committee, an independent body set up by the Government to scrutinise regulation, last night labelled the DWP charge cap impact assessment “not fit for purpose”.

The RPC said the department’s analysis did not adequately demonstrate why it believes a charge cap will have “zero impact” on the pensions industry. It also claimed the options laid out in the consultation had not been costed on a consistent basis.

Hargreaves Lansdown head of pensions research Tom McPhail, who had previously compared the impact assessment to the “Iraq war dossier”, said the DWP’s charge cap plans could be delayed or scrapped as a result of the RPC report.

However, a DWP spokesman says: “We do not agree with this rating [from the RPC], which has no implications either for our proposals or for the consultation process.

“The reason for consulting on a charge cap was to gather evidence about the potential impact of our proposals on savers and the industry. Our final decision will be based on evidence we have received, not on our initial impact assessment.”

The DWP has proposed three possible charge caps for auto-enrolment default funds – 0.75 per cent, 1 per cent or a two-tier “comply or explain” cap. It wants to introduce a cap for new schemes from April next year.

Click here for all our news and analysis on the Government’s charge cap proposals 

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

  1. Hargreaves Lasndown head of pensions research Tom McPhail, who had previously compared the impact assessment to the “Iraq war dossier”, said the DWP’s charge cap plans could be delayed or scrapped as a result of the RPC report.

    However, a DWP spokesman says: “We do not agree with this rating [from the RPC], which has no implications either for our proposals or for the consultation process.

    “The reason for consulting on a charge cap was to gather evidence about the potential impact of our proposals on savers and the industry. Our final decision will be based on evidence we have received, not on our initial impact assessment.”

    SO as expected the DWP commission an assessment and then ignore it because it does not give the answers they sought. Laughable

  2. Dear DWP – Please proceed with your ‘fingers in the ears humming loudly’ approach to this project. By rendering the majority of workplace pension schemes unfit for purpose, you will provide a fee based earning opportunity for the EB community of truly Herculean proportions.

    There aren’t that many of us left, so we can cherry pick the really good pieces of business and you can be assured that this will help with the economic recovery, certainly in terms of Range Rover sales. Did you know they are way over £100,000 these days? Shocking.

    While you are at it, be sure to ban Active Member Discount schemes. There are many employees enjoying annual charge rates well below 0.5% with deferred charges beneath your proposed charge cap levels. So clearly that kind of thing must be stamped out.

    2014 is beginning to look very rosy so please, please keep the fingers in there nice and tight.

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