Pension schemes should have no charge cap – Tisa

The Tax Incentivised Savings Association fundamentally opposes a charge cap on workplace pension schemes, its technical director Jeffrey Mushens has said.

Responding to the department for work and pensions’ consultation paper, Better Workplace Pensions: Putting Savers Interests First, he said: “We believe the focus should instead be on supporting a market already providing low charges, through a better-designed regime of consistent governance and disclosure that works for employers and employees, regardless of the type of scheme.”

In its seven-page response, the membership organisation said that alternative ways should be explored to introduce increased competition and improved outcomes for savers.

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In October, the FCA published its 36-page consultation paper, Charges in Workplace Personal Pension Schemes, in which it suggested a cap of 0.75 per cent a year of funds under management. The consultation is open until the end of December.

Mr Mushens said: “We feel it is better to rely on independent trustees exercising their fiduciary duties than the imposition of a charge cap, particularly where transactional cost are excluded from the cap.”

Tisa also said it was concerned that if the FCA was consulting separately, there was a danger of inconsistency and potential confusion with the requirements for occupation money purchases schemes.

Adviser View

William Annison, employee benefits consultant at Derbyshire-based HWWA Consulting, said: “The charge cap is about right. Insurance companies need to compete, and this is a good balance between providing a good low-cost pension for workers and the need to provide insurance companies with the financial motivation to innovate.

“We are now at the foundation stage, and as an industry we have a big engagement issue. The only way around it is to go into the workplace and talk, and tell them how it works.”