Autumn Budget 2021: Concerns raised over potential moves to raise the 0.75% charging cap on pensions
The Government said it is to consult on possible changes to the 0.75% cap on pension fund charges, potentially raising the ceiling so that the funds can be used to invest in more expensive projects, such as renewable energy.
Read our full round-up of today's big Budget announcements
From minimum wage increases to a cash boost for Universal Credit recipients, read about all of today's big announcements in our Autumn Budget 2021 round-up.
Speaking during his 2021 Autumn Budget, Chancellor Rishi Sunak confirmed the Government would consult on changes to the regulatory charge cap, "unlocking institutional investment while protecting savers”.
The pension charge cap was introduced in 2015 to protect workers auto-enrolled into defined contribution workplace pensions from having their savings whittled away by high charges. See our Pension Need-To-Knows guide for more on retirement saving.
Mr Sunak said the changes could see savers benefit from "higher return investments", which are more expensive to invest it. However, there are concerns that a removal of the cap or an increase would make pension savers worse off.
MoneySavingExpert.com founder Martin Lewis said he was 'slightly concerned' about the proposals, adding that while the move could allow for wider choice it should not be allowed to "push up the norm for charges for simple funds".
'Most pension schemes aren't charging anywhere near the cap'
Former pensions minister, Steve Webb, also had concerns about an increase in the cap, which he felt might be unnecessary. He said that the current cap was not a barrier to investing in more expensive investment projects as most providers were not charging "anywhere near the price cap" and so had room to manoeuvre.
According to Government figures, the average charge for a scheme is significantly below the cap, at around 0.4%.
He said: "Most schemes aren’t charging anywhere near the charge cap, most people are on around 0.4, so to go from that to around 1% (when investing in 'higher return investments') would be a huge increase, so you’d have to be very confident in a good return."
We have asked the Treasury when it plans to begin the consultation on the price cap and how long it will run for. We will update this story as soon as we know.
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