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01 Apr 2015

Providers Agree To Cancel £10bn Worth Of Legacy Pension Charges

Following calls from politicians and consumer groups, UK pension providers have agreed to scrap plans for high charges on savings held in expensive legacy schemes, Money Marketing reports.

The proposed charges would have affected some £10bn of such savings, but providers have now agreed to bring them down in accordance with the 0.75% charge on default auto-enrolment funds, which will take place starting in April.

So far the providers have remained anonymous; but following an audit at the end of last year, which found over £26bn in savings schemes that were charging more than 1%, pensions minister Steve Webb stated that he was willing to “name and shame” the offending parties if they did not lower their fees.

“Pension firms look after billions of pounds and millions of people´s retirement plans – so bold action on high charges is necessary,” he explained.

“I have had some tough conversations with the pension providers to make sure they are taking this matter seriously and put in place changes to deliver better value for savers.”

According to Webb, the “vast majority” of providers were prepared to act and are already taking steps to move savings to lower-charge schemes. If nothing else, it made greater financial sense for them as many of the old schemes required expensive and outdated IT systems to operate.

This decision will see a reduction in charges for around £10bn worth of pension savings – something that Webb hopes will instil greater confidence in savers when it comes to preparing for their future.

Whilst this measure does help to provide better value for savers, Webb feels that more should be done by providers to put members´ interests first. The government is now working alongside the FCA and HMRC to determine whether there are any ‘inappropriate barriers´ that are stopping them from doing this.

Copyright M2 Bespoke 2015

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