Personal Pension  

Aviva laments pension charge ‘race to the bottom’

The most visible move of the year in pensions was the charge cap consultation, according to John Lawson, head of policy at Aviva.

Pension charges have developed into a game of ‘who can go lowest’, with an assumption that lowest is best, Mr Lawson said.

But he warned advisers, when it comes to pension charges, it is a far more complex matter than ‘cheapest is best’.

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He said: “We need to ensure we consider the importance of good customer service and choice as well as low charges.”

Reflecting on 2013, Mr Lawson said pensions’ policy remained a rapidly moving beast, starting with auto-enrolment getting into full swing.

However, while some large employers joined in summer 2012, Mr Lawson said many October stagers used the three-month postponement window to push their effective start date into January 2013.

This trend towards using postponement has continued throughout 2013, he added, as has the growing use of phased contributions starting at 2 per cent, rather than the full 8 per cent.

Mr Lawson also highlighted the continuing swathe of policy changes that seems to occur each year, with the latest issue on the horizon a proposed charge cap for auto-enolrment pensions and the removal of cnsolutancy charging from all DC schemes.

“The undercurrent of much of the policy agenda has been around quality standards and good member outcomes. The government is clearly trying to ensure that any retrospective look at automatic enrolment does not identify people who were put into pension schemes that did not give good value for money.

“As we look ahead to 2014, we await the announcement on charge caps and whether any of the ‘defined ambition’ proposals will be legislated for. With the 2015 election now appearing on the horizon, DA looks that it may run out of time.

“However, that might underestimate the minister’s ambition and desire for change.”