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Webb warns providers: ‘We will cap pension charges’
The government will cap pension charges if providers do not increase transparency for auto-enrolment.
Pensions minister Steve Webb has threatened to cap pension charges for auto-enrolment if the industry doesn’t increase transparency.
Giving evidence at the House of Commons Work and Pensions Committee today (25 January), work and pensions minister Steve Webb said: “The industry should be in no doubt. If they don’t get their act together, we will cap.
He added: “It’s tempting to think, why don’t we just cap it anyway.”
When questioned about his plans for a code of practice for charging, Mr Webb responded: “Practice in the industry has been variable at best on charges and transparency. Transparency is the key, plain English is the key.
“I’m in no doubt that charges are crucial but even small differences in charges can have a huge impact on final pensions.”
He added that he anticipates no problem with the initial implementation of auto-enrolment, which will include only ten of the largest employers.
Mr Webb said: “If those 10 can’t get low charges then we may as well just give up.”
However, he outlined two concerns about capping charges: first, difficulties in definitions could mean charges might simply be moved around; and second, Mr Webb believes capping charges could damage diversity which would allow higher-charges for more ‘bells and whistles’ products.
