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
  • January 2014
01

DWP dismisses pension charge cap delay claims

Open-access content Monday 20th January 2014 — updated 5.13pm, Wednesday 29th April 2020

The government today branded as ‘speculation’ claims that the introduction of its planned charge cap on defined contribution pension schemes has been put off till next year.

A Department for Works and Pensions consultation last year explored the possibility of capping charges on auto-enrolment schemes. The cap would first be imposed on employers staging from April 2014 and be extended to cover all schemes by April 2015.

The Financial Times last week reported that the cap would be shelved for at least a year, and possibly beyond the next general election. Instead, the government is believed to want to issue a new white paper on the broader issues of pension charges and governance.

The DWP told The Actuary that the implementation of the cap would be delayed. But this was due to the consultation receiving '166 responses that inevitably takes a long time to go through', a spokeswoman said.

She refused to comment on the estimated implementation date.

'We are looking at the consultation responses and will make an announcement in due course.

'This is an important and complex consultation that requires our proper consideration to ensure we get it right.'

The delay has prompted opposition demands for an explanation as to why the government is 'kicking rip-off pension charges into the long grass'.

Gregg McClymont, Labour's shadow pensions minister, said: 'Is it chaos and disarray within government, or have ministers caved into the vested interests of the fund managers and pension giants who are accused of slicing and dicing the savings of hard-pressed British savers?'

'Capping pension charges would help families in Britain who are facing a cost-of-living crisis. Labour called for a cap on pension charges last year, but regrettably the government failed to act and now ministers seem to be in full scale retreat.'

Others accused ministers of creating a climate of uncertainty.

'[The delay] is bad news for savers. High charges, or even moderately high charges, have a very large impact on final fund values,' said Morten Nilsson, chief executive at NOW Pensions.

'Capping the overall percentage of an individual's pension pot that can be lost to charges over the lifetime of the scheme would protect savers but give providers flexibility in terms of what they offer and how their charges are structured.

'Delaying this decision creates uncertainty for the industry and for the tens of thousands of employers who are selecting a workplace pension for auto enrolment this year.'

But others welcomed the delay. Hargreaves Lansdown said the argument in favour of introducing a charge cap now had been 'poorly made'.

'Far more value is being lost from the pension system at the point of retirement than would be saved through the implementation of a charge cap,' said Tom McPhail, head of pension research at the firm.

Kevin LeGrand, head of pension policy at Buck Consultants, agreed that the delay was good news for the pension industry.

'The government has apparently decided to take stock and give proper consideration to the wider issues which include the need for greater transparency of charges and of the effects on a commercial market of using such a blunt instrument.'

Last month, the DWP was heavily criticised after its assessment of the impact of a cap on pension charges was given a 'red card' and deemed as 'not fit for purpose' by the independent Regulatory Policy Committee. 

This article appeared in our January 2014 issue of The Actuary .
Click here to view this issue

You may also be interested in...

Further personal allowance hikes 'could hit pension saving'

Proposals to increase the income tax personal allowance to £12,500 could hit pension savings by taking many low-paid workers out of auto-enrolment, a report has warned today
Thursday 16th January 2014
Open-access content

Sharp rise in state pension age 'unfair on older workers'

Actuaries Buck Consultants have disagreed with the ‘dramatic’ rise in state pension age proposed by the Institute of Economic Affairs, saying changes must be balanced to protect those close to retirement.
Monday 13th January 2014
Open-access content

Collective pension model gains ministerial support

Pension minister Steve Webb will back Dutch-style collective defined contribution pension schemes in the UK as part of his proposals for reshaping the pension market.
Monday 27th January 2014
Open-access content

IFoA welcomes charge cap delay

Actuaries have backed the government’s decision to delay implementation of the charge cap for defined contribution pensions and called for more focus on the quality of schemes
Monday 27th January 2014
Open-access content

Trust-based DC members increase by 14%

The number of trust-based defined contribution members in the UK has increased by 14% over the last year, from 2.2 million to 2.6 million, the Pensions Regulator said today
Wednesday 29th January 2014
Open-access content

2013 deaths highest for five years

Death rates are up in England and Wales reaching more than half a million during 2013, official figures have revealed today
Thursday 30th January 2014
Open-access content
Filed in
01
Topics
Pensions
Share
  • Twitter
  • Facebook
  • Linked in
  • Mail
  • Print

Latest Jobs

Senior Reserving Analyst

London (City of)
Negotiable
Reference
149485

Senior GI Modeler - Capital and Planning

London (Central)
£ excellent
Reference
149436

Risk Oversight Manager

Flexible / hybrid with a minimum of 2 days per week office-based
£ excellent
Reference
149435
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