Skip to main content
The Actuary: The magazine of the Institute and Faculty of Actuaries - return to the homepage Logo of The Actuary website
  • Search
  • Visit The Actuary Magazine on Facebook
  • Visit The Actuary Magazine on LinkedIn
  • Visit @TheActuaryMag on Twitter
Visit the website of the Institute and Faculty of Actuaries Logo of the Institute and Faculty of Actuaries

Main navigation

  • News
  • Features
    • General Features
    • Interviews
    • Students
    • Opinion
  • Topics
  • Knowledge
    • Business Skills
    • Careers
    • Events
    • Predictions by The Actuary
    • Whitepapers
    • Moody's - Climate Risk Insurers series
    • Webinars
    • Podcasts
  • Jobs
  • IFoA
    • CEO Comment
    • IFoA News
    • People & Social News
    • President Comment
  • Archive
Quick links:
  • Home
  • The Actuary Issues
  • May 2013
05

Webb announces crackdown on pension charges

Open-access content Friday 10th May 2013 — updated 5.13pm, Wednesday 29th April 2020

Consultancy charges on pension schemes being used for auto-enrolment will be banned under plans set out by pensions minister Steve Webb today.

2

Regulations will be laid 'as soon as possible' to outlaw the charges as part of a 'two-pronged' approach to address 'high and inappropriate' charges, he revealed.

The other aspect of the plan will involve a consultation being held this autumn to cap the charges levied on all defined contribution default funds - the investment option used by most pension savers. This move comes in response to the Office of Fair Trading inquiry into competition in the DC market which was launched in January and is expected to report shortly.

Webb noted that the government's own review of consultancy charges had found that existing measures to prevent advisers deducting high charges from members' pension pots were inadequate. Consultancy charges can have a disproportionately high impact on people who move jobs regularly, he added.

'With millions of people taking up pension saving for the first time under automatic enrolment, we have to give people confidence that they will get good value for money,' Webb explained.

'That is why we are banning consultancy charges, where scheme members end up paying for advice given to their employer. In addition, the OFT is investigating the whole workplace pensions market and we will act promptly and vigorously later this year in the light of their findings.'

The announcement came as the Department for Work and Pensions also published its Pensions Bill, as promised in this week’s Queen’s Speech. The bill, which was presented to Parliament yesterday, includes the introduction of a new single-tier state pension, to be implemented in April 2016.

It includes plans to bring forward the increase in the state pension age to 67 and to automatically link increases in the future state pension age to rises in longevity.

The bill will also legislate for the new ‘pot follows member’ system which aims to make it easier for people to keep track of their pension pots as they move from job to job.

And it will introduce a new statutory objective for The Pensions Regulator to take into account employer growth in all its regulatory activities.

The plan to take action on consultancy charges was welcomed by Morten Nilsson, the chief executive of pensions provider NOW: Pensions. 'Building consumer confidence in auto-enrolment is essential to its long-term success.  Over time, consultancy charges can significantly reduce the value of members' pension pots and these opaque charging structures help to stoke the fires of mistrust.

'The most important outcome of auto-enrolment is that members receive value for money to ensure they are in the best possible position to build up a substantial pot of money to live off comfortably in retirement. Today's announcement will go some way to helping them achieve this goal.'

His sentiments were echoed by Tim Jones, chief executive of the pension scheme set up by the government specifically to meet the need of employers affected by auto-enrolment, the National Employment Savings Trust.

'We were concerned that consultancy charging could have been detrimental to specific groups of customers and, more generally, damage the reputation of automatic enrolment. We welcome that potential being removed,' he said.

However, Neil Carberry, director for employment and skills at the CBI said the business group was 'surprised' the government had decided to take action on charges given they were at their 'lowest-ever' level.

The CBI also remains 'unconvinced' about the benefits of the pot-follows-member approach for transfers of small pension pots, he added. 

This article appeared in our May 2013 issue of The Actuary.
Click here to view this issue
Filed in
05
Topics
Regulation Standards

You might also like...

Share
  • Twitter
  • Facebook
  • Linked in
  • Mail
  • Print

Latest Jobs

Senior Catastrophe Analyst

London, England
£70000 - £100000 per annum
Reference
146055

Catastrophe Analyst

London, England
Up to £50000 per annum + + Bonus
Reference
146053

Principal Pricing Analyst

England, London
£60000 - £70000 per annum
Reference
146052
See all jobs »
 
 

Today's top reads

 
 

Sign up to our newsletter

News, jobs and updates

Sign up

Subscribe to The Actuary

Receive the print edition straight to your door

Subscribe
Spread-iPad-slantB-june.png

Topics

  • Data Science
  • Investment
  • Risk & ERM
  • Pensions
  • Environment
  • Soft skills
  • General Insurance
  • Regulation Standards
  • Health care
  • Technology
  • Reinsurance
  • Global
  • Life insurance
​
FOLLOW US
The Actuary on LinkedIn
@TheActuaryMag on Twitter
Facebook: The Actuary Magazine
CONTACT US
The Actuary
Tel: (+44) 020 7880 6200
​

IFoA

About IFoA
Become an actuary
IFoA Events
About membership

Information

Privacy Policy
Terms & Conditions
Cookie Policy
Think Green

Get in touch

Contact us
Advertise with us
Subscribe to The Actuary Magazine
Contribute

The Actuary Jobs

Actuarial job search
Pensions jobs
General insurance jobs
Solvency II jobs

© 2023 The Actuary. The Actuary is published on behalf of the Institute and Faculty of Actuaries by Redactive Publishing Limited. All rights reserved. Reproduction of any part is not allowed without written permission.

Redactive Media Group Ltd, 71-75 Shelton Street, London WC2H 9JQ