View more on these topics

Labour pledges pension charge cap of 0.5%

Labour has pledged to cap annual pension charges at 0.5 per cent if it wins the next election.

The BBC reports the cap would initially be brought in at 0.75 per cent, and then would be reduced during the lifetime of a parliament.

Labour has also said it would require people buying an annuity to be referred to an advised or non-advised broker, a proposal first revealed by Money Marketing last summer

The party says that by shopping around for an annuity pensioners could be up to £400 a year better off. Citing figures from the House of Commons library, it adds that those with pension pots of £15,000 could get £173 a year extra.

Labour Shadow Work and Pensions Secretary Rachel Reeves told the BBC: “Rip-off pension fees and charges are costing savers thousands of pounds.

“An astonishing £1bn a year is lost because people aren’t offered the best deal when they approach retirement.”

The Government has delayed plans to bring in an automatic enrolment charge cap until April 2015 at the earliest. The Treasury is understood to have reservations about the proposals. 

The Department for Work and Pensions has proposed three possible charge caps – 0.75 per cent, 1 per cent or a two-tier “comply or explain model”.

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There is one comment at the moment, we would love to hear your opinion too.

  1. All this talk of charge cap assumes that the money is paid by the provider to the adviser. This is a complete nonsense from all aspects if you crunch some numbers.

    Currently the maximum monthly payments to AE are around £35. So that’s around £420 per year. Say the firm has 100 employees – £42,000 X 0.5% = £210

    Who pray is even going to get out of bed for that – let alone do the work that servicing 100 entails?

    So what is Westminster on about?

    On the other hand if employers need the advice they are going to be billed directly by the adviser. I have been to a presentation where such ‘specialists’ have already set their stall out and are charging multi thousands just for providing an initial report.

    With the additional employment tax (which is what AE is) and the sharks circling employers are going to be ecstatic that their cash flow is being hammered yet again. I have already seen comment in the Business Pages from leading business men referring to (amongst other things) AE as a tax – which is exactly what it is. The UK pays the lowest State Pension in the OECD – apart from Mexico. With the new proposals this is due to get even worse and will put us firmly in last place by some significant margin.

Leave a comment