Which? has been lobbying the Department for Work & Pensions in a bid to make sure employers who choose to provide qualifying GPP schemes, rather than personal accounts, will offer similarly low charges.
Principal policy adviser Dominic Lindley says: “We have said to the DWP that it has to make sure these qualifying schemes are of significant quality, which includes low charges.
“From the consumer’s point of view, I do not see anything wrong with providers having to reduce prices but we are not arguing for a specific charge cap.”
Standard Life head of pensions policy John Lawson says the insurer has had calls from consultancy firms asking in-depth questions about its GPP operating costs.
The Personal Accounts Delivery Authority is aiming to deliver personal accounts at a charge to members of 0.5 per cent. Chief executive Tim Jones has said in the past that if the scheme cannot be delivered for this it is not worth doing.
But Lawson estimates that charges for existing schemes average between 0.6 per cent and 0.8 per cent but some GPPs costs members over 1 per cent.
He says margins for group pension business are already thin and adds that providers would end up making a loss if charges are brought into line with personal accounts because they would not be able to “cut their cloth any finer”.
He says: “The Government is allowed to pass whatever regulations they see fit regarding the quality of schemes used to auto-enrol employees. So it could decide that charges are a quality issue and put a charge cap in place.
“The DWP seems to be wanting to set our profit margin for us rather than leaving it to competition. A charge cap of 0.5 per cent would see most if not all the schemes above that transfer to personal accounts.”
Lawson also questions whether it would be fair to force providers to compete when the personal accounts scheme already receives taxpayer handouts.
What is your view? Should the Government force providers’ charges down? Would it see GPPs dwindle and quality schemes transfer to personal accounts? Are provider charges justified?
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