Legal & General has announced it is capping charges for auto enrolment pensions at 50 basis points for investments in insured funds, as speculation mounts over a potential policy reversal by the government on a cap for charges across the sector.
L&G’s single charge covers both the annual management charge for administration of the pension (AMC) and the fund charge for the Legal & General default investment. The Legal & General Multi Asset Lifestyle Profile, will have a total charge not exceeding 50bps.
The cap will apply to both existing and new Legal & General DC pension customers. John Pollock, chief executive officer of Legal & General Assurance Society, said the firm wished to make “our position clear” ahead of a government consultation on “maximum charges for auto-enrolment schemes”.
Rumours have abounded that a consultation on pension scheme costs will result in a prescriptive policy imposing a cap on the charges providers can levy. FTAdviser sister newspaper the Financial Times, reveals today (9 September) that ministers are considering an about-turn in policy to enforce a ceiling on the amount savers can be charged.
Following intense lobbying over the level of fees across the sector, not least from the opposition Labour party, the FT reports that Steve Webb, pensions minister, is pressing for a cap in certain ‘special cases’. The move would be a dramatic reversal of current policy, which focuses on enforcing increased transparency over charges in order to bring down charges through competition.
John Pollock, chief executive officer of Legal & General Assurance Society, said of the firm’s move: “We have long been advocates of value for money and have avoided opaque charging structures such as active member discounts.
“This commitment will give our customers confidence in selecting Legal & General as their provider for automatic enrolment.
“Ahead of the government’s forthcoming consultation on maximum charges for auto-enrolment schemes, we have made our position clear that no employees saving in a workplace pension scheme should have to pay more than half a per cent a year of their retirement savings pot.”