View more on these topics

John McFall hits back at charge-cap critics

Lord John McFall has hit back at criticisms that his proposal to cap pension charges at 1.5 per cent will stifle competition and undermine automatic enrolment.

On Monday the Workplace Retirement Income Commission, led by former Treasury select committee chairman McFall (pictured), urged the Government to impose a cap on charges before October 2012 to ensure people get “good value for money” from their pension.

McFall said the cap should match the existing limits for stakeholder pensions, which are 1.5 per cent a year for the first 10 years and 1 per cent a year thereafter.

Hargreaves Lansdown head of pensions research Tom McPhail said the policy would stifle product innovation and risked “strangling auto-enrolment at birth”.

Speaking to Money Marketing, McFall says : “When I was chairman of the Treasury select committee I heard similar arguments in relation to split-capital investment trusts and payment protection insurance, where we have ended up with scandals, so let’s look ahead for once.

“We received evidence which said if we don’t introduce a cap there is the risk of mis-selling. One said mis-selling is in the DNA of the industry, so you will end up having to clean up a situation in the future if something isn’t done now.

“Given that we are trying to install trust and confidence in the system, it seems logical to intervene before auto-enrolment starts.”

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 11 comments at the moment, we would love to hear your opinion too.

  1. So allowing unqualified employers to give advice on pensions doesn’t present a risk of “mis selling”?

  2. McFall has just illustrated how much insight he has by comparing this situation with Spilt Caps and PPI rather than the catastrophically unsuccessful initiative called stakeholder pensions.

  3. John McFall should be made to become level 4 qualified like the rest of us. He is basically ignorant of financial services yet he has been set loose to tell us what to do. Also, has he not heard that you only get what you pay for.

  4. Is Lying Cheating & Flipping in the DNA of politicians?

  5. I am confused how might imposing a cap on pension plan charges be allowed by the competition authorities but agreeing a common level of factoring for commission not be allowed? We really do need some consistency.

    Leaving aside McFall’s rather silly comparison with the debacle around split capital trusts and PPI it is good at least to note that he wants people to get “good value” from their pension plans- so presumably he will be able to state what such good value looks like rather than just focusing on price?

  6. The original one dimensional analysis merited a one dimensional solution and this also merits a one dimensional retort to criticism.
    Why do we have to find jobs for has been (or maybe never-was) politicians to find “solutions” to big problems.
    There may be no solution to this problem, but there could be improvements that can be made that will increase take up of pension policies. But that is only one avenue to acquiring a fund to cover retirement. Multi-dimensional nudging may be beyond the comprehension of a politician who wants to make a name for having achieved “The Big Solution”.
    In reality it is all a sad game designed to give the impression that the Government “is doing something”.
    As ever Lord McFall has been able to generate headlines by being negative, which I suppose is the only way to generate media interest. I suppose we should just be thankful that attention is occasionally focused on a genuine social problem that has been with us for a few hundred years and never really appears to get any better or any worse.

  7. Blah blah blah blah ———–

    Mr McFall if it was all about price and cost, life would be so simple !!

    I think my next car will be a Lada so much more cost effective than the Aston Martin I was eyeing up !!!

    Thank you for you input

  8. Stuart Rathbone 3rd August 2011 at 1:31 pm

    Usual buck passing of the political class who will not man up and explain to the electorate that you have to work longer, save more and get less support from the state, and thereby be thrown out of office at the next election.

    Until and not until the political class as a body grasp this nettle noting will change.

    For our part we have an easy solution – bring on whatever charging structure you wish and we quote our costs on top to be directly paid by plan holder/employer and like every other business do not lift a finger until we get an order.

    If the electorate then go squealing back to their elected official the issue will be squarely back where it belongs.

  9. He has just demonstrated how little he knows.

    The NEST RIY is 2.9% for a 64 year old and 2.1% for a 63 year old, so should NEST be disallowed

    So Mr McFaul is basically saying that the Labour Gov’t got it wrong !

  10. Agree with Stuart Rathbones very sensible post.
    We should not lift a finger until our costs are agreed.The sooner politicians realise that like every other business with costs, in our case excessive,we need to make a profit in order to pay them,advice is only free if you are happy with the offering at MAS. Otherwise adviser chsrging will apply.

  11. Terence P. O'Halloran 4th August 2011 at 11:59 am

    John McFall is a miss selling scandal in his own right.

    Politically driven, incredibly naive.

Leave a comment