Planning blight fears as cap postponed

The lack of clarity around the level of a future pensions charge cap is creating planning blight for advisers and uncertainty for employers, consultants have warned.

Jelf Employee Benefits head of benefits strategy Steve Herbert says while the longer timetable for a decision on the level of a charge cap will pose no problems for those staging from its introduction, likely to be April 2015, this still means employers staging in the coming months have no guidance as to what will be acceptable in the future.

Herbert says: “Pension advisers are stuck at the moment because employers don’t know what sort of scheme will be permissible in the future. Should they go with a scheme at 0.8 per cent? That feels too high. At 0.7 per cent it feels safe, but who knows, given that the minister has been talking about the possibility of a 0.5 per cent cap. As advisers we are going to have to couch what we say to employers very carefully.”

“To make matters worse, there is no consensus of opinion as to where the charges cap will eventually settle.  The consultation suggested three different levels, and the minister has suggested others since the consultation began.  And the longer this goes on, and the closer we are to the general election, the more outside political influences could also be included in this key decision.”


Pensions minister Steve Webb’s written ministerial statement to Parliament:

“This government is committed to tackling high charges in workplace pension schemes. In particular, for those workers who do not exercise any choice, where they are automatically enrolled into a scheme then remain in the default fund.

“Our consultation on pension scheme charging closed at the end of November. We continue to examine the responses, and will bring forward further proposals, in due course.  However, one strong theme to emerge is about the timing for the implementation of any changes.

“We remain strongly minded to cap pension scheme charges in the default funds used for automatic enrolment. However, we have consistently encouraged firms to start getting ready for automatic enrolment twelve months ahead of the time the new employer duties apply to them. Therefore, to give those employers at least twelve months notice of the rules that will apply to them; I can confirm that any cap on charges will not be introduced before April 2015.”