Personal Pension  

Webb: April pension cap ‘not quite right’

Pensions minister Steve Webb has responded to criticism over his delay to the auto-enrolment cap on pension charges by arguing it would be impractical to bring changes in while companies are still working out their approach to corporate pensions.

Earlier this month, the department for work and pensions confirmed it would delay introducing a cap on workplace pension charges by at least one year.

At the time, Tom McPhail, head of pensions research at Bristol-based Hargreaves Lansdown, said the delay was “inevitable” as the argument in favour of introducing a charge cap now was poorly made and the DWP’s impact assessment was “botched”.

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The Regulator Policy Committee also declared the DWP “not fit for purpose”.

This followed a DWP consultation last year on the possibility of capping charges on auto-enrolment pension schemes, which prompted a storm of criticism amid concerns over a looming ‘capacity crunch’ and costs for its own default option, National Employment Savings Trust.

Speaking today (28 January) at a conference organised by Nest, Mr Webb said bringing a charge cap into effect this spring would mean many companies might have to re-evaluate the schemes they selected for their employers.

He said: “We say to employers, ‘tell you what, it’s actually not quite as straightforward as you might think, this auto-enrolment malarky. Why don’t you plan a year or more ahead’.

“Then saying, ‘guess what, that scheme you chose 12 to 18 months ago, I’m about to make it illegal in eight weeks’ time’, doesn’t quite seem right to me.

“So those that are saying we should have a charge cap in April 2014, I think you should be asked how they think they can get secondary legislation through Parliament in eight weeks but apart from that, whether actually giving people eight weeks’ notice of new standards is quite the right thing to do.

“So our commitment to quality, to value for money on charges, and governance and all the rest of it is undimmed, but we plan to do it in a way that enables firms to do it in a rational, planned way. That’s the only thing that was changed.”