https://www.gov.uk/government/publications/poor-value-workplace-pension-schemes-a-review
Despite a coruscating report from the Office of Fair Trading on the workplace pensions market and the introduction of a 0.75% charge cap for automatic enrolment in April 2015, concerns remain savers’ retirement pots will be eroded by high charges.
This is because the workplace pensions charge cap was not retrospective and only covers default funds, meaning schemes can continue to operate with charges above this level.
AJ Bell analysis shows that a saver with a £100,000 pot could have a pension worth £10,000 less after 20 years in a scheme charging 1% versus a scheme charging 0.75%. This assumes average annual growth before charges are deducted of 5%.
Tom Selby, senior analyst at AJ Bell, comments: “Clearly it’s good that some progress has been made on costs and charges in workplace schemes. However, it is worrying that three years on from the OFT’s damning report into workplace pensions - and despite the introduction of a 0.75% charge cap on default auto-enrolment funds in April 2015 - over 300,000 members may still be in poor value-for-money schemes.
“The DWP and FCA are right to focus on this part of the market and should seek reassurances from providers that they will address the issues raised as a matter of urgency.”