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Treasury pushing for higher auto-enrol charge cap

The publication of Government proposals to cap pension charges for automatic enrolment schemes may be pushed back with Treasury officials lobbying for a higher cap of 1 per cent, Money Marketing understands. 

In October, the Department for Work and Pensions published a consultation paper setting out plans to impose a price cap on auto-enrolment default funds from April this year.

The consultation proposed three possible charge cap levels – 0.75 per cent, 1 per cent or a two-tier “comply or explain” option. Under the final option, an employer would have access to a 1 per cent charge cap but would need to justify any charges above 0.75 per cent to The Pensions Regulator.

Sources say the Treasury favours a higher cap of 1 per cent as it reluctant to be seen as too interventionist. However, the DWP favours a stricter cap of at least as low as 0.75 per cent.

Pensions minister Steve Webb has previously made clear his desire to publish formal proposals for a charge cap early this year and aiming to have a cap in place by April.

One source says there is a “big debate” between the Treasury and the DWP over the level at which the charge cap should be set.

A separate source says: “The DWP says it is still aiming for January but the expectation is the final proposals will be published in February.  

“The Treasury has always been privately less forceful about a charge cap and whether it is necessary. It is the DWP who are driving this but if there is to be a cap, the Treasury would prefer it to be at the higher end.”

Cicero Group director and chief corporate counsel Iain Anderson highlights that a Lib Dem minister is leading the DWP work with Conservative ministers involved from the Treasury. “This is a further sign of the manifesto dividing lines being drawn,” he says. 

Syndaxi Chartered Financial Planners managing director Robert Reid says: “The DWP will have a fight on its hands because the Treasury usually comes out on top in these sort of arguments.”

In a joint statement, the DWP and Treasury say: “This is an important and complex consultation which requires our proper consideration to ensure we get it right, and we will confirm a publication date in due course.”

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