It proposed three possible options for the cap:
- A charge cap of 1% of the funds under management, reflecting the current stakeholder pension cap;
- A lower charge cap of 0.75%, reflecting the charging levels already being achieved by many schemes;
- A two-tier ‘comply-or-explain’ cap, which would set a standard cap of 0.75% for all default funds in DC qualifying schemes, with a higher cap of 1% available to employers that explained the reason for charges in excess of 0.75% to The Pensions Regulator.
Anything that reduces costs for employees and helps to increase the value of their retirement pot is a good thing, and it seems that many in the industry agree. But some have also questioned whether the government’s proposal goes far enough, suggesting a cap of 0.5%.
A pensions professional, with whom I was speaking before the consultation was published, suggested that placing a cap on charges could stifle innovation around investment returns and mechanisms to reduce volatility, if all providers shift their focus to racing to offer the lowest charges. It is a point of view I certainly hadn’t considered.
Let us know what you think.
Debbie Lovewell
Deputy Editor
@DebbieLovewell
Debbie Lovewell-Tuck is a business journalist with 20 years’ experience specialising in pay, reward and HR. She joined Employee Benefits as a reporter in 2003, before becoming editor in 2015. Debbie is also responsible for editorial content across Employee’ Benefits events, including Employee Benefits Live and the Employee Benefits Awards, as well as hosting Employee Benefits’ webinars.View full profile
