Around 90,000 workplace pension schemes would need to be reviewed if the government introduces a 0.75 per cent charge cap, according to figures from LEBC.
The Government’s document ‘Better Workplace Pensions: A Consultation on Charging – Impact Assessment Report’, proposes three options, with the lead option believed to be a 0.75 per cent charge cap.
LEBC says many of the 90,000 schemes it estimates would breach such a cap have been set up specifically to deal with auto-enrolment.
Aegon head of regulatory strategy Steve Cameron says the government’s price cap proposals risk placing a significant burden on providers just as the number of employers reaching their staging date starts to escalate. The Government says it wants a cap to take effect for all employers staging from April 2014, with those with staging dates prior to that date to be required to comply by April 2015. It also wants to see no active member discounts on schemes staging after April 2014.
LEBC group divisional director Glynn Jones says: “This statistic has not been reported on to date, but if progressed would be a serious further burden on employers. Plus how is the pensions industry expected to cope at a time when tens of thousands of new auto-enrolment schemes are having to be set up next year for SMEs.
“For an employer having to undertake a review, there would be significant additional financial costs. This seems particularly unfair as they have already taken the responsible route, with incurred costs, of establishing a pension scheme for their employees to comply. So through no fault of their own, the goal posts are effectively being moved and they would be expected to pick up the tab.
“Not only have they had the cost of establishing their scheme in the first place and all that entailed, but they are having to pay into it under the new auto-enrolment rules. And now they could be expected to incur further costs of a review, at a time when many businesses are working hard to move out of recessionary times.”
Cameron says: “This could all leave thousands of employers unable to use the scheme they were planning to. This will pose a huge logistical challenge at a time when employers may find they are unable to access advisers and providers in the way they have in the past.”