24 January 2014

Labour’s Shadow Pensions Minister has criticised the new cap on charges made by pensions providers that is being proposed by the Coalition ostensibly to save workers money on their occupational pensions.

The new scheme, which is set to be introduced next year, includes a cap of 0.75% on pension scheme charges. This will affect over 10 million workers, according to the government.

Gregg McClymont, the Shadow Pensions Minister, criticised the idea telling the Guardian that it would affect many future pensioners and that they would risk losing tens of thousands of pounds as a result.

Although Coalition Pensions Minister Steve Webb is claiming to be committed to a 'charge cap' on pensions, there is no written proof of this in the written ministerial statement. This means that his promise is only verbal and not set in stone and could all be empty words in order to maintain popularity ahead of elections.

Furthermore, Mr McClymont stated that the original proposals for a cap were much stronger, but have become watered down through the legislative process and due to the influence of powerful industry lobbyists.

“The government’s botched consultation has allowed vested interests to nobble the tough action required to deliver for Britain’s savers,” he said.

“The minister promised, when he launched the charge cap consultation, a full-frontal assault on pension charges. What we have today is a full-scale retreat. This matters not just because the government has said one thing and now appears to be doing something else, but because the millions of people who are being enrolled in a pension for the first time now will not have the protection that a properly designed cap could provide,” he added.

Despite there being no written proof there has been indications that these charge caps will only be introduced in April 2015. In the case of a Conservative win, there would no longer be any pressure to abide by Webb’s vows.