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.