Webb: providers should rewrite unfair pension charges
He said people trapped in old-style pension schemes with excessive charges should be offered a fairer alternative, without exit penalties by providers.
Webb told the Telegraph he would crack down on excessive fees in place on old-style pensions, which can see savers charged up to 4% of a pot’s value every year. He said thousands of people are trapped in such plans.
The report said savers can be charged up to 20% of the pension if they want to transfer to a better value scheme. It said hidden fees can wipe up to £100,000 off the value of a worker’s pension.
Writing in the Daily Telegraph, Webb said: “I would like to see the leading companies look again at their ‘back book’ of old pension policies.
“They should ask themselves if the battered reputation of their industry would be be greatly enhanced if they were to revisit these schemes and offer members fairer terms.”
The minister said the government would act within months to cap excessive pension fees if it has to.
This comes after Labour leader Ed Miliband made a speech about unfair pension charges and a report from the RSA last week said millions of pounds in hidden fees were extracted from savers every year.
Webb said many of the old-style pensions, dating from before the introduction of stakeholder schemes, offer terms that pension companies “would not dream of offering to new customers” today.
He added the government would ban pension companies from being involved in the government’s auto-enrolment programme if their charges were too high.
The Telegraph quoted Webb as saying: “I remain determined to make sure that every pound that [savers] put aside is turned into the maximum possible amount of pension.
“And if further measures are needed to clamp down on charges, then we will not hesitate to take them.”