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Industry hits back at Miliband’s ‘scaremongering’ over pension charges

Ed Miliband Labour 480

The Association of British Insurers has rubbished Ed Miliband’s attack on pensions charges, accusing the Labour leader of scaremongering.

According to reports, Miliband told a press lunch in Westminster yesterday that he is determined to tackle the “massive, massive issue” of pension charges. He suggested parts of the industry were charging between 4 or 5 per cent, resulting in people losing half their investment.

He said: “I am very worried about the scale of administration charges that people face. What you find in some parts of the industry – not all parts, clearly – is that people are facing not 0.5 per cent, which is the benchmark administration fee that we put forward in the government scheme when we were in government, but 4 per cent or 5 per cent.”

“We have got to drive down these administration charges and we can’t allow people to be ripped off in the way some people are.”

The ABI says Miliband is “absolutely wrong” to imply 4 or 5 per cent charges on pensions are normal.

ABI director general Otto Thoresen says: “In newly set up automatic enrolment schemes the average annual management charge of our members is 0.52 per cent. The average annual management charge for existing schemes is 0.77 per cent. For many other existing schemes, both large and small, charges can be lower than 0.3 per cent. Nobody in the pension industry would defend a charge of 5 per cent for a standard new pension and we would ask Ed Miliband to write to us with details of the schemes he is referring to.

“Scaremongering about charges runs the risk of putting off many people from saving into a pension, which is critical for their financial future.”

The Labour leader cited research by the House of Commons library which showed that a monthly contribution of £50 over 40 years with a 0.5 per cent annual fee would lead to a pension of £32,398. But the pension would halve in value to £15,964 if a higher annual fee of 4 per cent is levied.

He said he was considering a cap on charges citing Nest’s 0.3 per cent annual charge. However, Nest also has a 1.8 per cent contribution charge on new funds that will remain until the Government loan used to set up the scheme is paid back.

Miliband’s comments develop his theme of “predatory capitalism”, first aired in his conference speech in September.

Macbeth Currie senior consultant Duncan Philp says: “The only way I could see a charge at around 5 per cent is on a top end Sipp and that is because they are more complicated, so that is a reasonable charge for schemes that need more work. For run of the mill schemes charges are far lower than that. The typical charge I see is around 0.9 and that includes paying the adviser. Miliband’s comments are ridiculous, he is just trying to scare the public.”

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Comments

There are 18 comments at the moment, we would love to hear your opinion too.

  1. How much does the taxpayer pay in fees for his pension? 20%? 25%? Does this mean he disagrees with the NEST charging structure?

    Politicians must consder what is and is not responsible behaviour before making such bold statements. They’re fully aware that people cling on to soundbites, and what Miliband wants to leave in peoples’ minds is that he is tackling the big, bad, rip off pension industry.

    There’s no substance behind his statements, and in fact the only real outcome of this, other than people like me in parts of the industry getting hot under the collar, will be to ensure another swathe of people give up and don’t bother saving towards their retirement.

    That is something individuals and our nation can ill afford.

  2. As I understand it, Ed’s mate Gordon stole more than the value of tax receipts from North Sea oil from pension funds in the time he had his dirty fingers pawing over the exchequer.
    Now this nincompoop, who has never had a job in the real world, starts shroud waving.
    Being the lame intellectual he is, he lives in a rosy world where companies are run as chariies.
    Ed, you are a loser, you’re fired.

  3. What frightens me on these soundbites is that these people like Ed could one day end up in number 10. With politians so clearly ignorant of the facts it is no wonder our country has major issues. Forget MAS educating the unwashed masses, our politians don’t even understand our finances. It obvious from comments like this comment….

  4. Can somebody please name any pension company that charges 4% per annum? I’ve never come across one. This guy is making a myth sound like fact.

  5. I have a problem with the amount MP’s get paid and I want to stamp it out. We have got to drive down these excessive salaries and we can’t allow the tax payer to be ripped of by incompetent politicians who get involved in things they do not understand.

  6. Was it not a politician, like Ed, who stood up in Parliment complaining about the downgrading of the MP’s DB scheme from a 60th to a 45th!! best they all have NEST with a 3% ER contribution then lime the rest of our working population!

  7. i think a few choice words from some football players come to mind. so many to choose from, and all appropriate

  8. Milliband hasn’t got a clue. Another clueless politician. And yes Mr Milliband can you tell me a pension company that charges 4% pa.

  9. Well, the Daily Telegraph seemed to agree with Ed in 2011: “Fees knock 25pc off the value of your pension fund” http://www.telegraph.co.uk/finance/personalfinance/pensions/8780399/Fees-knock-25pc-off-the-value-of-your-pension-fund.html

  10. What with ‘red in the face, needs anger management help’ Cameron, frontally lobotomised, by his own words, not mine, Clegg and this silly fool leader of the opposition, the country is surely being run by the worst set of politicians of all time, and that’s saying something as we’ve had some Looney’s in the past. Silly Ed needs to do his research before opening his stupid mouth.

  11. No doubt, Mr Miliband’s comments were as a result of the report issued by the National Audit Office a couple of days ago. Unfortunately, what he didn’t understand, wasn’t told by his advisers or chose to ignore (you decide), was the fact that this report was on all pensions (DC) and not just new pensions (since 2000/01)

    I’m sure there are plenty of old pensions with high charges – I’m looking at one now for a client, which has a 1% AMC, 5% B/O Spread, reduced allocation rates and a £2.30 policy fee – but he should rightly know that since stakeholder (shambles that it was, but brought in by his party) pension charges have been very low in comparison to previous schemes.

    Perhaps, he should recommend that people with existing pensions of over a certain age, should seek independent financial advice about them – it might actually make him look good, it would help the financial services industry and, most importantly, it would help the consumer have a potentially greater income in retirement.

  12. Scott Taylor-Barr 13th July 2012 at 11:12 am

    When will Politicians learn that these actions have serious, serious consequences?
    What will now happen is that an even larger section of the population will feel that insurance/pension/investments are all worthless and further pressure will be placed on the State to look after them.
    Of course by that time it will be someone elses problem and Ed will be happily retired on his tax-payer funded final salary MP’s pension scheme…

  13. What people fail to realise is that these old ‘high charge’ contracts actually work out cheaper than stakeholder contracts if they both run their full term.

    Any fee will reduce returns – maybe we should all operate for free?

  14. Larry in London 13th July 2012 at 12:58 pm

    Ed will never end up in No. 10. He was the result of a classic misfire of the Labour machine.

    The ‘normal’ Labour crowd wanted David, but the unions voted for Ed and the unions won.

    Ed will be dumped by the apparatchiks before the next election – he’s too left wing and not inspiring enough to win the hearts and minds of the average robotnik. This speech about pension charges proves that.

    I love you all

    Larry

  15. Fully Informed 13th July 2012 at 1:04 pm

    Chris Miller Ed Milliband is 8% ahead in the polls my friend. Not sure you are in a position to fire him. If this carries on he will be PM. Maybe the industry needs to engage with himrather than carping from the side-lines?

  16. In what universe will a £50 per month contribution over 40 years give a pension of £32,398?

    This would give a pension fund of around £112,229 which in turn might give a pension (annuity) of around £6,700 pa – Dr. Bunsen Honeydew needs to take another stab at teaching Beaker some basic mathmatics!

    Good lord, these are the people in charge, it’s little wonder we’re all f**ked!

  17. Exasperated Me 13th July 2012 at 3:22 pm

    Who was that bint at HMT who started all this RDR rubbish off?

    Seagull?

    She was told by the ABI that 30% of all pension costs were commission. Hence Callum’s call that the industry was ‘bust’.

    Well we all know what and who is bust and it ain’t the advice process.

  18. ED will not reach no 10 his own party will remove him, as this incident shows he cannot detect suspect information and that will be his downfall. Fully needs to remember that Kinnock had a similar lead at the very time it didnt matter, polls when elections are far away with small samples tell us nothing.

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