A decision on a price cap for workplace pensions has now been deferred until April 2015, pensions minister Steve Webb announced this morning at a CBI pensions conference.
The unsurprising postponement has been welcomed by the industry, and emphasises that making a success of auto-enrolment is a top priority for the government.
Angela Seymour Jackson, Aegon’s managing director of workplace solutions, said the department for work and pensions’ decision will allow employers and providers to get on with enrolling many thousands of employees into workplace schemes, often for the first time.
She said: “Rushing new scheme conditions through at this critical stage would have disrupted many employers’ plans to use good existing schemes. The Pensions Minister’s decision will avoid employees losing out on valuable contributions while employers made alternative arrangements.”
Speaking to FTAdviser, Adrian Boulding, pensions strategy director at Legal & General, said the industry was tipped off by this decision following DWP’s previous comments.
He said that L&G still stands by its comments that 50 basis points is “good value for money”, adding that the provider will continue to charge 50bps or less for its auto-enrolment schemes.
Mr Boulding said: “We are not the only provider that charges 50bps or less and we would urge employers to look at unfair charges and examine their conscience and say ‘why am I not delivering value for money for my employees’?”
Tom McPhail, head of pension research at Hargreaves Lansdown, said: “30,000 companies are due to automatically enrol their staff into a pension in 2014. Pushing a cap through for this April would have been a mad rush and could well have derailed the auto-enrolment programme.
“Waiting a year will give valuable breathing space to employers so they can get auto-enrolment up and running, while ensuing scheme members can be confident they are getting a fair deal. The government now urgently needs to address long-running failings in the retirement income market.”
John Lawson, Aviva’s head of policy, said: “Steve Webb has signalled his support for a pension charge cap, which will give employees confidence that they will get a fair deal at time when many will be saving for the first time through automatic enrolment. Employers are under pressure with the rollout of automatic enrolment - giving them some certainty that any charge caps will apply from 2015 gives them time to prepare.
“In 2012 Aviva committed to only auto-enrol employees into low cost, modern schemes with an average total charge of less than 1 per cent per annum. But this is not only about charges, it’s right the government also looks deep into areas such as governance, scheme quality and improved transparency, as the OFT has been doing, to ensure we get a balanced outcome.
