On Monday, L&G announced plans to cap charges for automatic enrolment pension schemes at 0.5 per cent for investments in its insured funds.
The cap covers both the annual management charge for administration of the pension and the fund charge for the L&G default investment. An L&G spokesman says the cap will apply to both existing and new pension schemes.
The move pre-empts a Government consultation, due to be published later this year, which will outline proposals to cap charges for auto-enrolment schemes. The Office of Fair Trading is also due to publish a report on the defined contribution market this month.
L&G Assurance Society chief executive John Pollock says: “Ahead of the Government’s forthcoming consultation on maximum charges for auto-enrolment schemes, we have made our position clear that no employees saving in a workplace pension scheme should have to pay more than half a per cent a year of their retirement savings pot.”
Aviva head of policy, pensions and investments John Lawson says introducing a price cap could result in charges converging around the level of the cap.
He says: “The average charge across all the schemes we wrote last year was 0.5 per cent, so we feel we are offering very good value for money.
“If you put a cap on your charges you will inevitably move towards a single-price offer rather than having a range of charges.
“The market might well move towards a single price in the future but we don’t feel a need to react immediately to what L&G have done.”
Scottish Widows head of pensions market development Ian Naismith says: “We price each scheme on individual merits and often they end up being 0.5 per cent or below. We have no plans to set a cap charges.”
Standard Life head of workplace strategy Jamie Jenkins says: “We are not currently considering introducing a charge cap for auto-enrolment.
“We are confident our book of business is competitive and average charges for new schemes across the industry are close to 0.5 per cent anyway.
“We are comfortable to continue with a more open pricing policy.”
Syndaxi Chartered Financial Planners managing director Robert Reid says: “I think L&G have jumped the gun on this. If the Government comes out and proposes a cap of 1 per cent then they could be left at a disadvantage to the rest of the market.”