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Intervention urged on pension charges over 1.5%

The Government should intervene over pension charges on schemes where people are auto-enrolled if they have annual management charges of more than 1.5 per cent, according to shadow pensions minister Rachel Reeves.

Speaking to Money Marketing at the Labour Party conference last week, she said high AMCs significantly reduce the size of pension pots and could undermine the success of auto-enrolment.

She says that the maximum charges should be in line with the cap on stakeholder pensions, which is currently 1.5 per cent but is due to fall to 1 per cent in 2014, two years after auto-enrolment comes in.

Reeves (pictured) said: “If significant charges are placed on these schemes, the Government should intervene. For auto-enrolment to work, we need trust in the system and a belief the products will deliver.”

Speaking at a fringe meeting, National Association of Pension Funds chief executive Joanne Segars said: “This is an issue we cannot dodge if around half of personal and stakeholder pension schemes are charging more than 1 per cent.”

Speaking at a Confederation of British Industry conference last week, pensions minister Steve Webb said the Government is considering capping pension charges on default auto-enrolment funds.

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. Fascinating stuff from a shadow minister whose party oversaw the introduction of NEST.

    Perhaps Rachel would like to calculate the fees for a new entranct to NEST and express this as an Annaul Management Charge for the first few years.

    Her policy if elected would effectively rule NEST out of particiapting in auto enrolment!

    Thie is not a simple issue and headline comments like this do little to help develop understanding

  2. Ms Reeves – your party came up with the idea of Nest.

    Will it be implementing a capped AMC of 1.5% too?

  3. Is it just me, but I have not seen or set up a post stakeholder GPPP/PPP at anything other than 1% MAX, and in the case of GPPPs, nearly always much less than 1%, let alone 1.5%. Suicidal terms from the providers, but good for clients. Where is the problem?

  4. Have been in this industry for near 25 years and can’t remember coming across a default fund for a scheme over 1%.

    Sounds like someone grandstanding and picking a fight but where there isn’t one to pick.

  5. I agree with the earlier comments – I have handled group schemes for many years and very rarely see anything over 1%. Most of the schemes we install are nearer 0.5% AMC with no other charges. But by all means go ahead and cap NEST…the 1.8% ‘initial charge’ is robbery and takes us back to the 70s. I can only assume Rachel Reeves knows very little about pensions, a factor that I am sure won’t stop her unleashing root and branch reform on the industry if we are unlucky enough to see her in power.

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