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Pension charge cap to be delayed for a year

Pension charge cap to be delayed for a year

Plans to cap pension charges for auto-enrolment schemes will be delayed by a year or more, according to the Financial Times.

In October the Department for Work and Pensions (DWP) proposed to cap pension charges for auto-enrolment schemes at 0.75% or 1%.

The paper, put forward by pensions minister Steve Webb (pictured), planned to implement the cap in April, when smaller firms begin staging.

However implementation will be delayed for at least a year.

It comes after the Regulatory Policy Committee (RPC) heavily criticised the DWP’s failure to conduct a satisfactory assessment of the impact of a charge cap.

The RPC, which is an independent government body, said the DWP’s impact assessment was ‘not fit for purpose’ and did ‘not adequately demonstrate’ why a charge cap was the right solution.

The consultation proposed a 1% charge cap, in line with current stakeholder products.

The third option is a two tier ‘comply or explain’ cap where there would be a standard cap of 0.75% for qualifying schemes, with a higher cap of 1% available to employers who reported to the Pensions Regulator why the scheme charges exceeded 0.75%.

It said a final cap could lie in between 1% and 0.75% depending on the responses to the consultation. 

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