View more on these topics

L&G warns 0.75% pension charge cap will cost savers £4.3bn

The DWP is consulting on a charge cap of 1 per cent, 0.75 per cent or a two-tier “comply or explain” cap.

Legal & General has warned failing to reduce the proposed auto-enrolment pension charge cap to 0.5 per cent could cost savers in legacy schemes over £4bn.

In October, the Department for Work and Pensions revealed three options for capping charges on auto-enrolment default funds.

The DWP is consulting on a charge cap of 1 per cent, 0.75 per cent or a two-tier “comply or explain” cap.

Pensions minister Steve Webb has indicated he wants to impose a cap of 0.75 per cent. But L&G warns failure to set a stricter 0.5 per cent cap will reduce the value of 1.7 million savers’ pension pots by £4.3bn.

L&G Assurance Society chief executive John Pollock says: “A pension charge cap at 0.75 per cent is a poor idea by the Government. Not only will it potentially cost legacy scheme pension savers £4.3bn in lost savings, it will also be ineffective in driving down pension charges for millions of savers.

“L&G is in favour of having a meaningful cap at 0.5 per cent, not only for new auto-enrolment schemes, but for legacy pension schemes as well.

“It is here in the legacy world that savers may be getting a poor deal, with fees at much higher levels.”

Keyte Financial Planners director Robin Keyte says: “This is all about promoting better consumer outcomes and I think it is great that a company of L&G’s stature is coming out and saying something like this.

“If the cap is set at 0.5 per cent I am not going to throw my arms up in the air because it would help ensure consumers get a good deal.”

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com