The Government is coming under pressure from insurers to delay introducing a charge cap for existing pension schemes for three years due to concerns it will disrupt automatic enrolment.
Last month, the Department for Work and Pensions revealed three options for capping charges on auto-enrolment default funds.
The DWP is consulting on a charge cap of 1 per cent, 0.75 per cent or a two-tier “comply or explain” cap.
It has proposed introducing the cap in April next year for all employers staging from April 2014 onwards, before extending it to employers who staged between October 2012 and March 2014 by April 2015.
Money Marketing understands officials have held talks with industry representatives about possible transition arrangements over the past two weeks.
Aegon regulatory strategy director Steven Cameron says existing schemes should be given up to three years from their auto-enrolment staging date to comply with the cap.
He says: “A transitional period is absolutely essential, given the industry capacity to review schemes and put in place new schemes if necessary.
“If we rush this some individuals may be moved to a scheme which is worse than their existing arrangement.”
Scottish Life managing director Ewan Smith says: “Price capping should only be used as a policy option when everything else has failed because of the potential unintended consequences.
“We should implement recommendations by the Office of Fair Trading in full but agree a timescale to do that. We think that three years would be appropriate for the industry to get its house in order.”
Apfa director general Chris Hannant says DWP proposals to remove adviser commission from schemes used for auto-enrolment are “wrong-headed”.
He says: “If the Government is concerned about what scheme members pay then the annual management charge is the way to tackle that.”