The government sets the ceiling for pension costs at 0.75%
The government has announced that it will set the ceiling for occupational pensions at 0.75%.
The proposal to cap pension costs was part of the consultation of the Ministry of Labor and Pensions on charges on workplace pension plans, opened in October 2013 and closed in November 2013.
The government has also set equivalent ceilings for pension plans with combined charge structures.
Three different categories of pension costs will be totally prohibited. The are:
- Sales commission payments deducted from participants’ pensions.
- Increased costs when people are no longer employed by an organization, but leave money in the employer’s pension plan.
- Advice fees, where members must pay for advice given to their employer.
In addition, the government has announced that there will be new strict rules to ensure that all hidden “transaction” costs in pension plans are disclosed, and it will then consider whether these should also be included in the pension plan. the new ceiling on charges.
An independent audit of the pre-2001 and high rate pension schemes is to be completed by the end of the year. The government will consider whether further measures to protect plan members are necessary as a result of this review.
Pensions minister Steve Webb (photo) said: “With the new measures, this government will be the first to have an iron grip on pension costs. We’re going to put the loads in a vise, and we’re going to tighten the pressure, year after year.
“Over the next ten years, the new fee cap will shift £ 200million from pension sector profits into the pockets of savers. Savers have paid too much for too long. It’s time to put the saver on first.