The Government looks set to reject Lord John McFall’s recommendation to cap pension scheme charges at 1.5 per cent ahead of automatic enrolment.
This week, the Workplace Retirement Income Commission, led by former Treasury select committee chairman McFall, urged the Government to impose a cap on charges before October 2012 to ensure people get “good value for money” from their auto-enrolled pension.
But Money Marketing understands there is little appetite among policymakers to intervene pre-emptively, after a 2009 Department for Work and Pensions research report found that charges for workplace personal pensions were lower than 1 per cent for more than half of schemes.
Hargreaves Lansdown head of pensions research Tom McPhail says: “Price capping is not on the agenda. The burden of evidence required to demonstrate that it would be appropriate to intervene at that kind of level would be very difficult to gather.”
A spokeswoman for the DWP says: “We will continue to monitor the landscape once auto-enrolment starts but we are confident that competition, with Nest as a benchmark scheme, will keep charges low.”
Speaking to Money Marketing about criticism that a charge cap would stifle product innovation, former Labour MP McFall says: “When I was chairman of the Treasury select committee I heard those arguments in relation to split-capital investment trusts and payment protection insurance, where we have ended up with scandals, so let’s look ahead for once.”