On 30th October, we updated you on the Government plans to cap auto enrolment pension charges, and it would appear we aren’t alone in our concerns over the proposed cap and what this could mean for UK employees.
Phil Loney, the chief exec of insurer Royal London has been quoted as saying “We think it is the wrong approach in a market where prices are falling” and supported this with figures from the National Association of Pension Funds which state the average annual fee of providers is 0.51%. Since this is much below the proposed 0.75% cap, Mr Loney fears, as we do, the change could actually encourage an increase which would be damaging for the very workers the cap is aiming to protect.
The Consumer group Which? has launched their ‘Hands Off My Pension’ campaign, calling for the government to lower the proposed cap to 0.5%. They predict that reducing the cap on charges would mean a saving of up to £40,500* to an employee’s pension fund over their working lifetime.
The executive director of Which?, Richard Lloyd, said that “While we strongly support the direction of the Government’s plans, there is an urgent need for better minimum standards for all workplace pensions so people can be confident that they are being enrolled into high quality, good value schemes.”
If their campaign is successful, the reduction to 0.5% should address concerns over the cap causing an increase in fees but with the decision to introduce any cap at all having yet to be made; it is anyone’s guess what the end result will be. The only certainty at this stage is Auto Enrolment itself.
Even with the amount of column inches devoted to Auto Enrolment in the media over recent months, many small businesses are still unaware of the date by which they must enrol their employees and what this will involve; to avoid being caught out, take a look at our information on Pension Auto Enrolment, here.
If you would like guidance on your pension responsibilities or need support to set up an appropriate scheme, myhrdept can assist you in making the right choices for your business. Contact us for more information.
*The figure of £40,500 is based on Government calculations with contributions of £100 a month, increasing at 4% a year for 46 years.
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