Former FSA chairman Lord Adair Turner is calling for pension charges to be capped at 0.5 per cent and says the Government needs to commit to a firm timetable to implement the cap.
The Department for Work and Pensions has proposed three possible caps on auto-enrolment charges – 0.75 per cent, 1 per cent or a two-tier “comply or explain” model.
Pensions minister Steve Webb confirmed last month the charge cap would not be implemented until April 2015 at the earliest. There are concerns the plans have been shelved until after the May 2015 general election because the reform is “too complicated”.
Labour is proposing a 0.75 per cent cap with a 0.5 per cent cap imposed as part of quality standards on certain stranded pots.
Speaking during the Pensions Bill report stage in the House of Lords yesterday, Lord Turner, who chaired the Pensions Commission, said the current cap proposals are too high.
He said: “I strongly believe we should make a clear commitment, by a clear date, to get on with this and have a charge cap in place, and that 0.5 per cent is the appropriate figure.”
DWP minister Lord Freud said the Government had given a “strong steer” the cap would be in place by 2015.
He said: “The pensions minister has been clear we are committed to seeing the charge cap through during the life of this Parliament which means before May 2015.”
Last week, the Government said it would force fund managers to publish transaction costs but former chancellor Lord Nigel Lawson called for more action on transparency.
Speaking at the debate, Lord Lawson said: “It is not adequate; it has to be all costs. There are, for example, investment managers’ fees, performance fees and custody fees, all of which are not transaction costs.
“Indeed, the Investment Management Association has stated that it does not classify equity commissions as transaction costs. Therefore, clearly the limitation to transaction costs is an invitation to abuse. All costs that are incurred have to be included.”