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02 Dec 2013

Pension Provider Calls For 0.5% Management Fees Cap

The British government´s plan to impose a cap on management fees for pension schemes has stirred the pot in the industry lately. While the government is expecting input from the industry on the proposed changes, pension provider Legal and General claims that the proposed 0.75% cap on fees is too high and will result in consumers collectively paying more than £4.3 billion too much over the entire period of saving for retirement.

However, Legal and General´s opinion is not widely supported by other providers, as many believe that imposing a limit of fees is not a good idea as it will have a negative impact on competition. Moreover, experts predict that imposing a cap will be hard to enforce.

But in stark contrast to the majority of industry players, Legal and General not only believes the cap is necessary, but claims that it should not exceed 0.5% - the fee charged by the company itself. The proposed 0.75% is not likely to yield the results the government is looking for and will not deliver value for money to savers, Legal and General said in a press release.

If the limit is lowered by only 0.25% to 0.5%, an employee starting to save into a workplace pension at the age of 22 and paying £100 per month will save an extra £40,500 by the time they retire that would have otherwise been charged as fees if the cap is imposed at 0.75%, the provider estimates.

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