Exterminate! Exterminate! High charges to be exterminated!
Management fees charged by pension providers could be capped between 0.75% and 1%, according to proposals being set out by the government.
The Treasury is consulting on its plans to cap fees, which could save consumers tens of thousands of pounds.
Some legacy schemes set up more than a decade ago have been found to charge up to 2.3% a year in management fees - and that's often on top of front loaded charges meaning the first couple of years of contributions have virtually been wiped out to pay commission and set up fees, etc.
On Tuesday, Pensions Minister Steve Webb said the government would launch a "full frontal assault" on pension fees.
Auto-enrolment
The consultation will seek industry input on three possible options: a 1% cap, a 0.75% cap, or a two-tier "comply or explain" cap, where pension providers will be capped at 0.75%, rising to 1% if they can explain to regulators why their scheme must charge more.
A Treasury spokesperson said any final cap could lie somewhere between the two levels suggested, depending on the evidence received.
The proposed cap would also only apply to auto-enrolment funds.
Steve Webb, Pensions Minister, said: "We do have powers to cap a much wider range of charges. The document today looks at banning something called active member discounts. That means when you leave a firm they jack your charges up - we don't think this is right so we will probably ban those."
When asked if charges should be capped lower than 0.75%, the minister said the cap should not be so low that it discouraged providers. He said the cap needed to be "at a level where there's competition in the market".
Labour's shadow minister for pensions, Gregg McClymont, said the opposition would have to look at the detail of the proposal "to see if it goes far enough".
But he added: "It is clear this government is not ready to take the decisive action needed to stand up for ordinary savers, given that they have just voted against our amendment to the pensions bill that would have made all pension costs and charges transparent."
Since last October, workers have been gradually signed up to workplace pensions, such as the government funded National Employment Savings Trust (Nest) scheme, unless they deliberately opt out.
Over the next five years, nine million extra people are expected to join so-called "defined contribution" schemes.
The average charge on a pension set up in 2012 was 0.51%, but the Office of Fair Trading (OFT) estimates that there are more than 186,000 pension pots with £2.65bn worth of assets subject to annual charges of more than 1%.
Older pension schemes, set up more than a decade ago, were found to be charging as much as 2.3% in annual fees.
The government said that someone who initially saved £1,200 in the first year and worked for 46 years could lose almost £170,000 from their pension pot with a 1% charge and more than £230,000 with a 1.5% charge.
And a saver with a 0.75% annual charge on their pension pot could end up £100,000 better off than if they had been charged a rate of 1.5%, it added.
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