Defined Contribution  

Govt to ban flat fees for small pots

When asked whether Now Pensions would be changing its fee structure, Adrian Boulding, director of policy at Now Pensions, said: “The next step is a government consultation which will start in the next few weeks and run for a couple of months, so until government conclude that we can't make decisions. 

“We will then need to give employers six months notice of any changes."

Pension contributions plunge

Meanwhile, Covid has caused contributions to DC schemes to fall by 11 per cent between Q1 2020 (January to March) and Q2 (April to June), while employer contributions were down by 5 per cent.

During the coronavirus crisis there were concerns that savers would opt out of their workplace pensions in search for extra cash, but the pandemic had less of an impact than expected as numbers held steady.

The data, published this morning (January 13), showed there were 23m DC members by the end of June 2020, the same number as at the end of March, compared with 22.4m at the end of September 2019. 

The Office for National Statistics said this “may be because of the impact of the coronavirus pandemic on the labour market, but caution is advised in interpreting the results.”

Tom Selby, senior analyst at AJ Bell, said the data begins to show the impact Covid-19 has had on people saving for retirement.

Mr Selby said: “This drop in contributions likely reflects the impact of furloughing, with total auto-enrolment contributions based on 80 per cent of salary for millions of people. Some workers will also inevitably have opted out due to pressure on their incomes caused by the pandemic.

Meanwhile, Alistair McQueen, head of savings & retirement at Aviva, warned many could face a worse retirement if these trends continue.

Mr McQueen said: “Furlough, however, has brought with a drop in incomes for millions. This has resulted in an alarming 11 per cent drop in total private sector occupational defined contributions by employees, from £1.76bn in Q1 to £1.56bn in Q2 2020. 

“This will mean a poorer retirement for many. The longer this drop persists, the greater retirement impact will be."

amy.austin@ft.com, benjamin.mercer@ft.com

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