Radical reforms for pension charges announced by the government are unlikely to help those approaching retirement.
Pensions minister Steve Webb is capping pension costs for new and young savers under the smokescreen of helping them tackle inflation and greed by pension providers.
However, hundreds of thousands of middle-aged savers are unlikely to see any benefit from the move.
Webb wants auto-enrolment pension charges capped at 0.75% a year.
According to the Office of Fair Trading, around 186,000 pensions worth more than £2.6 billion are paying annual charges to their providers of at least 1%.
Savers ripped off
Official research suggests someone saving £100 a month into a pension for a full 46 years would pay around £100,000 with charges set a 1% and up to £230,000 if the fee was slightly higher, at 1.5%.
The Department for Work and Pension’s consultation wants views from the financial industry and the public on setting a cap that protects savings. Options being considered include:
- A higher charge cap of 1% of funds under management
- A lower charge cap of 0.75% of funds under management
Webb said: “Savers are being ripped off with excessive charges and must know that their pension is value for money. The consultation makes some suggestions about charges, including a ban on all charges exceeding 0.75% a year.
“This makes the system fair for everyone enrolled in a workplace pension. Dealing with pension charges is an issue that governments have ducked for too long.”
Pension charges cover a range of costs and fees paid by retirement savers for administration fees, contribution fees, active member discounts, and investment fess such as transaction costs.
Annuities are for mugs
While industry commentators welcome the government proposals on fees, critics are still calling for action on annuity charges.
Ros Altmann, a former government pension adviser, claims some retirement savers are paying up to £3,500 per £100,000 to arrange an annuity in what financial advisers and firms call ‘mug money’.
“These fees are unnecessary and make a pension fund which should last for life significantly smaller,” she said.
Altmann also claimed annuities were past their sell-by-date having outlived their usefulness.
“Annuities were devised in the days when someone retired and only lived for 10 years and had to fund a comparatively short time after giving up work. They clearly don’t work now when people can live for 25 or 30 years or more after retiring,” she said
Steve Webb said: “Savers are being ripped off with excessive charges and must
know that their pension is value for money.
What a hypocrite this man is ! He is happily robbing the frozen pensioners by denying them any indexing and then talks about savers being ripped off !
What the hell do you think you are doing then Mr Webb ?
What a pathetic excuse he is for a minister who is suppose to act in the interests of the electorate and be a fair and just individual in office but continues what he knows is wrong but condones discrimination by actually including it in the new Pensions Bill.
“This makes the system fair for everyone enrolled in a workplace pension. Dealing with pension charges is an issue that governments have ducked for too long.”
Thus spoke the Minister for Pensions, Steve Webb. This came from someone who opined that “fairness” would be one of his basic principles when he presented his Green Paper on Pension Reform…and we have all seen how that principle has been abandoned as the bill progressed through to its passage in the Commons. Is this auto enrollment charges capping going down the same “fairness” road?
Clause 20 of the Pension Reform Bill seeks to perpetuate the freezing of the State Retirement Pension for some 4% of all UK Pensioners world wide simply because of where they live. Unfrozen in Niagara Village USA but frozen across the water in Niagara Village, Canada. “Illogical, irrational and discriminatory.” – not my words but Steve Webb’s and yet when he looked so uncomfortable as Sir Peter Bottomley and Sir Roger Gale dismantled his so-called arguments during the third reading of the Bill he produced no sustainable justification for its inclusion – or the continuation of the policy for existing pensioners.
Perhaps, Mr. Webb dealing with pension charges is an issue that governments have ducked for too long but ducking by the government of implementing fairness, justice and equality for all British pensioners abroad is an issue that far outweighs the case for pension fund charging caps.
A classic case of ‘do as I say, but not as I do’ as far as Webb is concerned. He pretends to have the interests of pensioners at heart but still he cannot see what a hypocrite he is. All the while he is determined to include clause 20 in the new pension bill he has zero credibility. At least he is being reminded of the pledge he made to the frozen 4% of state pensioners while he was shadow pensions minister, that he would end the frozen pension injustice. Sir Peter Bottomley and Sir Roger Gale are challenging the inclusion of this disgraceful policy in the new bill and working hard to get this illogical and discriminatory policy consigned to a history book of shame. Shame on you Mr Webb for letting down the few who are struggling on a state pension that decreases year after year.