Government says drawdown charge cap possible

Government says drawdown charge cap possible

The Government will introduce caps on drawdown charges if they are necessary, a minister has warned.

Minister for welfare reform Lord Freud was asked last week whether he agreed with a claim made earlier this year by his colleague Baroness Altmann, the new pensions minister, that a cap on drawdown charges was important.

The Conservative peer said: “We are going to see how the market develops. It has only been going for two months and if it looks appropriate we will introduce charge caps.

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“We are meeting the industry and working with them to make sure they do produce the right level of charging and we are able to monitor that.

“We already have transparency in the accumulation phase and if there is a necessity in the decumulation phase we will do it.”

The issue had been raised by Labour’s new shadow pensions minister, Lord Bradley, who asked Lord Freud whether he agreed with the views Baroness Altmann had expressed before becoming a minister.

He said: “Does the minister agree with his new ministerial colleague the pensions minister Baroness Altmann when she said earlier this year that a cap on drawdown charges was important, and I quote, ‘so that customers are not ripped off’ and further, I quote again, ‘a 2 per cent a year charge just to keep your pension invested and to have access to it would take away much of the investment return and be a terrible deal for customers’?”

Lord Bradley was supported by a number of other peers including Lib Dem Lord German.

He said: “My Lords, at all stages between the pension saver’s pocket, the investment and back again, there are hidden charges and fees.

“Does my noble lord agree that there should be transparency for pension savers and they should know what the hidden fees and charges are?”

Lord Freud responded by saying the previous government had already taken some action on charges, such as the cap of 0.75 per cent on funds.

He said the government would do more if necessary.