Pension providers have agreed to cut charges on £10bn of savings trapped in expensive legacy schemes following months of pressure from consumer groups and politicians.
The unnamed providers say they will slash charges to bring them in line with the 0.75 per cent charge on auto-enrolment default funds which comes into force this April, the Department for Work and Pensions says.
Pensions minister Steve Webb has said he was willing to “name and shame” providers who were reluctant to reduce high fees following a December 2014 audit that found £26bn of savings in schemes charging over 1 per cent.
In January Money Marketing revealed the cost of delaying a cut in legacy fees by a year would potentially cost savers £340m.
Webb says: “Pension firms look after billions of pounds and millions of people’s retirement plans – so bold action on high charges is necessary.
“I have had some tough conversations with the pension providers to make sure they are taking this matter seriously and put in place changes to deliver better value for savers.
“I was reassured by the vast majority who were ready to take action and were already moving funds to lower charging environments. For many it was plain business sense, because old schemes were running on old expensive IT systems.
“Their response means that around £10bn of pension savings identified as at risk of high charges in the legacy audit will see a reduction in charges to match the charge cap. This will give more people the confidence to save for the future.
“This action goes a long way to achieving good value for savers but I expect providers to go further in making changes in members’ interests.”
Webb adds that the Government is working with the FCA and HMRC to assess whether “inappropriate barriers” exist to stop providers’ making improvements in members’ best interests.