The DWP’s assessment of the impact of a pension charge cap is “not fit for purpose” because it fails to clearly show the affect it will have on pension providers.
The damning verdict has been delivered by the Regulatory Policy Committee, an independent body set up by the Government to scrutinise regulation.
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.
The RPC says the DWP’s assessment of the impact of the reform, published alongside the consultation in October, does not adequately demonstrate why it believes a charge cap will have “zero impact” on the pensions industry.
It says: “The IA, as drafted, does not give a clear assessment of the potential impact on the pensions industry, particularly where a charge cap could be introduced.
“In addition, the options have not been costed on a consistent basis so as to allow meaningful comparison at consultation stage.”
The RPC says the DWP published the impact assessment before receiving its report on the quality of the analysis. It is the first time a DWP impact assessment has been deemed “not fit for purpose” by the RPC.
The People’s Pension head of policy Darren Philp says: “The Government’s charges impact assessment has been shown the red card by its own Regulatory Policy Committee.
“This was a consultation that lacked detail and was built on sand. The Government now needs to rethink and pick up the gauntlet thrown down by the recent Office of Fair Trading report to improve transparency and comparability across pensions.”
This comes after Hargreaves Lansdown head of pensions research Tom McPhail accused the DWP of deliberately misrepresenting statistics on the impact of its proposed charge cap, comparing its rationale for introducing the cap to the “Iraq war dossier”.