Pension fee cap to 'save people tens of thousands of pounds'
Treasury proposes a cap of between 0.75% and 1% on management fees charged by pension providers
INDIVIDUALS could save tens of thousands of pounds under new government proposals to cap pension fees, the Treasury has claimed.
The government is currently consulting on plans to limit management fees charged by pension providers to between 0.75 per cent and 1 per cent.
Steve Webb, the pensions minister, has described it as a "full frontal assault" on pension fees and said the move was just the start of a much broader review of pension charges.
There are more than 186,000 pension pots, worth a total of £2.65bn, that are subject to annual charges of more than 1 per cent, according to the Office of Fair Trading. Some schemes set up more than a decade ago are currently charging up to 2.3 per cent a year in management fees.
A saver paying 1.5 per cent in annual charges on their pension pot could save £100,000 if a 0.75 per cent cap was introduced, says the Treasury.
The government's decision to intervene in the market "may well prove popular", says the Daily Telegraph's political editor James Kirkup, as long as it works and does not lead some fund managers currently charging less than the cap to increase their fees. The average charge on a pension set up in 2012 was 0.51 per cent, well below the proposed limit. "The ceiling, in other words, must not become a floor," says Kirkup.
Consumer group Which? welcomed the plan for a cap but urged ministers to see if it could be set even lower. Executive director Richard Lloyd said: "Even a fraction of a per cent can have a significant impact on pension funds, and people need to be confident that their scheme is giving them the best value for money."
However, the pensions minister told BBC Radio 5 Live Breakfast that the cap should not be so low that it discouraged providers. ·