Pensions minister Steve Webb is to hold crunch talks with pension providers following a report that exposed the extent of high charges levied on savings held in old pension schemes.
Yesterday, an audit of legacy defined contribution schemes carried out by a board appointed by the Association of British Insurers found up to £26bn of pension assets are being charged over 1 per cent.
Default auto-enrolment schemes will be subject to a 0.75 per cent charge from April next year.
Webb says he was “genuinely shocked” by the report’s findings and pledged to push providers into coming up with “big, bold solutions”, the Telegraph reports.
“I read a lot of these sorts of reports and I was genuinely shocked. There were jaw dropping moments reading this report and a lot of this has been hidden,” he says.
“These are the guilty secrets of the pensions industry laid bare. They are finally coming clean about what’s going on.
“I am now saying to the industry, I am going to get them all in, I am going to talk to them all one by one in the New Year and challenge them to come up with big, bold solutions.”
Webb says the law could be changed to move people into schemes with lower charges and hinted the pot-follows-member model could be extended.
“One option would be to expand the scope of that and say, next time you sign up to a new pension that’s shiny, new and cheap, unless you stop us, we will pull across your old expensive, high-cost pension by default,” he says.
He adds one provider says scrapping exit penalities would barely affect its balance sheet but noted for some members higher charges could be paying for valuable guarantees.