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04 Nov 2013

Government Reveals Plans For Pension Fees Cap

The UK government is planning to place a cap on management fees that pension providers charge scheme members, with the limit expected to be set between 0.75% and 1%. The exact cap will be announced when the Treasury has completed its consultation on imposing the limit, BBC News reported.

The government believes that such a cap on fees could save UK workers thousands of pounds that are otherwise charged by pension providers. A recent investigation into pension schemes, commissioned by the government, discovered that a number of schemes set up more than ten years ago charged as much as 2.3% in management fees per year.

The consultation will be looking for comments from the industry on three proposed options. The first one suggests a cap of 0.75%, the second one is slightly higher at 1%, and the last proposal is a two-tier option, where all providers are capped at 0.75% but this can rise to 1% if the pension scheme can explain to regulators why they need a higher cap.

Last week, pension minister Steve Webb confirmed the government´s plans to crackdown on pension schemes that fail to act in their members´ best interest, and to tackle excessive pension fees. In an interview with BBC Radio 5, Webb stated that the move was just a step towards a more comprehensive review into the British pension system, and further reforms are likely to take place over the next few years.

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