Tuesday, August 16

Autumn Budget 2021: Concerns raised over potential moves to raise the 0.75% charging cap on pensions

‘Most pension schemes aren’t charging anywhere near the cap’

Former pensions minister, and partner at the consultancy firm Lane Clark and Peacock, Steve Webb said that the barrier to investing in more expensive projects isn’t necessarily to do with the cap.

He said: “Most schemes aren’t charging anywhere near the charge cap, most people are on around 0.4, so to go from that to around 1% (when investing in’higher return investments’) would be a huge increase, so you ‘d have to be very confident in a good return.

“There’s also no guarantee that any of this would actually happen. If I’m a workplace provider and there’s a scheme offering a rate of 0.4% and another offering 1%, you’re going to go with the vanilla 0.4%. Another issue is that, say you tie your member’s money up in a longer term investment and it’s tied up for 10 years, but the member then says they’re retiring tomorrow, the danger will be where does the money come from?”

We have asked the Treasury when it plans to begin the consultation and how long it will run for. We will update this story as soon as we know more.