From April, people automatically enrolled into a workplace pension will see their charges capped at 0.75%, unless they have chosen a more expensive option. The details are set out in draft regulations laid before Parliament on 4 February 2015.
For an average earner currently paying into a fund with a charge of 1.5%, this new cap could save them around £100,000 over the course of their working life. Over the next decade, the default fund charge cap will transfer around £200 million from the pensions industry to savers.
Minister for Pensions Steve Webb said:
Today is an excellent day for pension savers. It is vital that workplace pension schemes are run in the interests of their members and that their hard-earned savings are not eaten away by excessive charges.
Over 5 million people have now been automatically enrolled into a workplace pension and by 2018 millions more will be saving for the first time, or saving more. This is why we are building a pensions system that these workers can save into with confidence – and not see their money disappear in opaque charging structures.
There is an understandable buzz around what April will bring for those retiring now, with the unprecedented pension freedoms coming in. But these reforms show we are also determined to help the pensioners of tomorrow – people working hard and saving hard for their families’ future.
The next stage of the government’s work to ensure full disclosure of costs and charges throughout the value chain is also set out in the February paper – with the plan to publish a joint call for evidence with the Financial Conduct Authority in spring 2015.
Most of the updated draft regulations will come in to force on 6 April 2015, subject to Parliamentary approval.