War on pension charges: Webb

The pensions minister told parliament at a reading of the Pensions Bill on Tuesday that a consultation would launch this qwwk to seek views on what the cap should include.

The cap would go further than recommendations made in the Office of Fair Trading’s recent probe into the defined contribution pension market, although Mr Webb had previously hinted the cap could be set at 0.5 per cent.

He said it was necessary to introduce a “tougher” cap than was implemented for stakeholder pensions by the previous Labour government, adding that the effects of accumulated charges made 1 per cent an “alarmingly high” figure.

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The minister said: “We understand that there are difficulties in finding a comprehensive definition of charges, as we could cap the annual management charge and find that providers cunningly manage to get money back through some other disguised charge.

“My instinct is to go for a broad measure but there will be discussion about whether to put transaction costs in the cap.”

Howard Bullock, co-director of Essex-based Clear Financial Advice, said: “Even if a scheme can be run at a lower charging level, the support that goes around that scheme would suffer and it would be more difficult to provide comprehensive support to employers and members.”