The government's planned 0.75 per cent cap on pension management is "too high", according to pensions' provider Legal and General.
If customers paid the maximum of this cap, they would be spending £4 billion too much over a lifetime, and so a cap of 0.5 per cent would be better, says the firm. John Pollock, Legal & General Assurance Society CEO, said: “The Office of Fair Trading state typical new auto enrolment schemes actually charge 0.51 per cent. Having a cap at a much higher figure will have no impact on new pension schemes, and will result in legacy savers being treated unfairly compared to new savers."
Beyond Legal and General, much of the industry is against caps on fees altogether. The government, meanwhile, believes that the industry is unnecessarily charging customers and has stated that it will clamp down on these pension fees, with some schemes charging as much as two per cent. During its consultation, the government looked at three options: a one per cent cap, a 0.75 per cent cap and a two-tier cap if providers can explain to regulators why they should charge more.
Speaking to the BBC's Today programme, pensions expert Ros Altman said: "We don't want to dumb down pensions to the lowest common denominator."
Ms Altman added that a low cap would make it hard for pension firms to provide competitive strategies.
More and more workers have been signing up to workplace schemes, such as the government-funded National Employment Savings Trust, since October 2012, unless they choose to opt out. With auto enrolment rolling out, millions more people will be brought into such schemes over the next few years.
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