30 October 2013 by Alexandra Jones
A cap on the amount pension schemes can charge per year has been proposed by the Government, which will limit the fee to 0.75%.
The management fee cap is intended to make retirement funds much more valuable than they are currently, a move which the National Association of Pension Funds (NAPF) believes spotlights transparency and value for money in the pensions market.
The Government’s consultation paper is scheduled to be released tomorrow (Thursday) and is expected to announce proposals to impose a limit of around 0.75% to 1%.
The 1% tariff is likely to be subject to the ‘comply or explain’ policy, whereby providers must justify why they need to charge more for their service.
The NAPF points out that charges have decreased over the past few years and the average charge now stands as low as 0.51%, however, some older pension schemes still charge around 2.3% per year.
Pension savers are being urged to resist considering the charges in isolation as members of schemes could be benefitting from quality and efficiencies that increase their pension savings.
Helen Forrest, NAPF Head of Policy & Advocacy said: ‘The NAPF wants to see pension schemes that offer quality and value for money to scheme members.
‘Charges should be seen as part of a bigger picture that includes quality of services provided to savers through their working life and a robust investment strategy that generates good returns.
‘The NAPF believes that transparency, good governance and scale are important in ensuring good member outcomes. The NAPF will be responding to the Government consultation.’