Asked by: David Mowat (Conservative - Warrington South)
Question to the Department for Work and Pensions:
To ask the Secretary of State for Work and Pensions, what steps his Department plans to take to ensure that schemes identified by the Independent Project Board as having excessive charges take effective and timely action in response and will be subject to sanctions if they do not do so.
Answered by Steve Webb
The recent audit of charges and benefits in legacy pension schemes was undertaken by an Independent Project Board, on which the Department for Work and Pensions was represented.
In their report, published on 17 December 2014, the Board made clear that action must be taken quickly to address high charges.
I have since met with the key providers to discuss their plans to ensure members receive value for money. Whilst the details of these discussions are confidential, a picture is emerging of industry action, with several providers outlining significant steps to address high charges. For example, preparations for the default fund charge cap which, subject to Parliamentary approval, will apply to schemes used for automatic enrolment from April, have already triggered a reduction in charges in many schemes. Moreover, some schemes with relatively higher charges are delivering valuable benefits, such as guaranteed investment returns, which may be better than anything available on the market today, and which it may be in members’ interests to keep.
Both the Government and the Financial Conduct Authority have powers to extend the charge cap to legacy schemes, if this is necessary to protect consumers.