Pension charges to be capped at 0.75% from 2015
27 March 2014
Tough new measures announced by Pensions Minister Steve Webb today will ensure pension schemes deliver value for money for savers.
They will end rip-off charges and ban hidden costs, helping people build up the best retirement income possible from their savings.
From April 2015 a 0.75% cap on charges will be introduced for the default funds of all qualifying schemes.
Over the next 10 years, the government estimates that an extra £195 million of pension contributions will turn into pension savings, as part of a fairer society, rather than being swallowed up by unnecessary costs and charges.
An individual earning £20,000 would save around £35,500 over their lifetime if they saved in a scheme with a 0.75% charge compared to a 1% charge.
The government has also set out equivalent caps for schemes with combination charge structures.
Three different categories of pension charge will be banned altogether:
- payments for sales commission which are deducted from members’ pensions
- charge hikes when people are no longer employed by a company but leave money in the company’s pension scheme
- ‘consultancy charges’ where members have to pay for advice given to their employer.
In addition there will be tough new rules to make sure that all of the hidden ‘transaction’ costs in pension schemes are published, and the government will then consider whether these should also be included in the new charge cap.
Steve Webb said that the pensions revolution does not stop at automatic enrolment. People need to have confidence that putting money into good pension schemes where their money will be looked after.
You can read the full press release on GOV.UK.