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Halve pension charges to 0.5%, says thinktank

The financial services industry is “bloated”, “overstaffed” and “overpaid” and pension charges should come down to 0.5 per cent, according to right-wing thinktank the Adam Smith Institute.

Speaking at last week&#39s Pensions Management Conference in London on the future of retirement saving, director of special projects Matthew Young spelled out a tough challenge to the industry.

He claimed the market is not working and is overcharging, underperforming and riddled with complexity while consumer expectations of saving are low.

Young believes pension charges will have to halve even from the current stakeholder price cap of 1 per cent to really give consumers a good deal.

He predicted that the market will be taken over by new entrants as many existing players, already struggling in the 1 per cent world, will not be able to shake off their legacy infrastructures and adapt.

The thinktank also threw its weight behind the campaign to abolish compulsory annuity purchase.

Young said the state system is totally unsustainable and the Government needs to introduce a compulsory top-up pension.

He said: “The market is underperforming and overcharging. It is bloated and overstaffed. The market does not work but current players are not going to drive change.

“It will be new entrants without legacies who will drive total charges down to around 0.5 per cent. Com-pulsion is entirely appropriate up to a certain level where people are then free of being a call on the state.”

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