‘Unnecessary and unfair’ pension charges banned
The move is part of an overhaul of pension charges to better protect consumers.
In the past six months, the government said it had conducted a thorough review of consultancy charges, and concluded that existing measures to prevent advisers deducting high charges from members’ pension pots are “inadequate”.
It also found that consultancy charges can have a disproportionately negative impact on people who move jobs regularly.
The ban will apply both to occupational and personal pension schemes, and the government said it will “lay regulations before Parliament as soon as possible”.
Responding to the ban Richard Lloyd, Which? executive director said:
“This is a big win for millions of consumers with auto-enrolment pension schemes. It is absolutely right to ban these unnecessary and unfair charges that meant people’s retirement savings were going straight into consultants’ pockets rather than pension pots.”
Pensions minister Steve Webb said: “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.
“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 government will publish a consultation this autumn, in light of a forthcoming Office of Fair Trading (OFT) report on the workplace pensions market.
The consultation will set out proposals including a cap on default fund charges in defined contribution schemes.
Legislation in the Pensions Bill published today will enable the government to take targeted and effective action, it said. Other measures in the Bill include:
• Bringing forward the increase in state pension age to 67 to 2026-28
• Introducing a framework for the regular review of state pension age
• Provision for a system of automatic transfers of small pension pots
• Introduction of the Bereavement Support Payment
• A new statutory objective for The Pensions Regulator.
The government is also publishing an updated impact assessment on the single-tier pension, and its response to the Work and Pensions Select Committee’s report on the single-tier provisions in the draft Bill.