Nigel Peaple, director of policy and advocacy for the Pensions and Lifetime Savings Association, says: "We are pleased to see the level and composition of the 0.75 per cent defined contribution pension charge cap retained following the DWP’s review.
"The cap is an important consumer protection, ensuring savers receive better value for money from their pensions, though in practice most DC schemes are already offering great value to their members by offering default funds that operate well below the cap."
As reported by FTAdviser: "The government first proposed the ban on flat fees in June 2020 in response to industry concern about the deleterious effects flat fees and admin costs have on small pots.
"Their depletion by charges and administrative fees has long been a serious problem for members, who can in some cases see their pensions eroded entirely over the course of their careers, at a cost to the individual of hundreds of pounds of savings."
The DWP also recommended setting a minimum balance of £100, below which flat administration fees cannot be applied. Mr Peaple says this will protect the pension savings of workers with the lowest pension balances, but warns a longer-term solution to the small pots issue must be developed.
According to Mr Peaple: "It is important the government continues to consult with the industry on this issue via the Small Pots Working Group as well as on future increases to flat fee balance minimums to deliver a successful automatic enrolment market that works for all savers.
“We are also pleased to see DWP recognises the success of the Cost Transparency Initiative, the industry standard for investment cost data developed by the PLSA, the Investment Association and the Local Government Pension Scheme advisory board.
"There has been widespread take-up among asset owners and we encourage all pension schemes to adopt the standard.”
With costs looking to be under control and more transparency given to consumers, this might help consumers feel less worried about the future purchasing power of their pension pots.
But as commentators have stated, the full damage of Covid-19 on pension savings is yet to be quantified, and those in DC schemes, who bear all the investment risk themselves, will need advice in the months and years ahead to ensure they move from a financially vulnerable situation to a financially stable position.
Simoney Kyriakou is senior editor of FTAdviser
Have your say: What do you make of the pension trends? Let us know at fa.letters@ft.com
