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Government caps workplace pension charges at 0.75%
by Dylan Lobo on Mar 27, 2014 at 14:18
The government will introduce a 0.75% charge cap on auto-enrolment pension schemes from 2015.
The cap will be introduced for the default funds on all qualifying schemes from April 2015, with the cap reviewed in 2017.
Pensions minister Steve Webb (pictured) described the measures as 'tough' and said they will ensure pensions schemes deliver value for money for savers.
A statement from the Department for Work & Pensions (DWP) said the new rules would end 'rip-off' charges and ban hidden costs to help people build the best possible retirement income pots from their savings.
The DWP has also banned three different categories of pension charges:
* Payments of sales commission which are deducted from members' pensions;
* Charge hikes when people are no longer employed by a company but leave money in a company's pension scheme;
* 'Consultancy charges' where members have to pay for advice given to their employer.
On top of this, the DWP said new rules would be brought in to make sure hidden 'transaction' costs in pension schemes are published to determine whether the should be included in the new charge cap.
The government believes that over 10 years the new measures will see an extra £195 milllion added to pension contributions rather than swallowed up by unnecessary charges.
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