UK considers 0.75 pct cap on workplace pension fund charges
LONDON Oct 30 (Reuters) - Britain's government said on Wednesday it was considering imposing a 0.75 percent cap on management fees charged by the private pension funds into which millions of workers are being automatically enrolled.
Over the next five years, all workers aged between 22 and state retirement age who earn at least 9,440 pounds ($15,200) a year will be enrolled into a private pension scheme selected by their employer, unless they are already in a scheme or opt out.
The change will affect up to 9 million Britons - almost a third of the workforce - and increase the annual amount being saved into workplace pensions by around 11 billion pounds.
The average annual fee for these schemes is 0.51 percent of assets under management, but more than 150,000 people are in schemes where the fees exceed 1 percent, the government said.
"Enough is enough on charges. People need to know they are getting value for money when they save into a pension and not being ripped off," pensions minister Steve Webb said in a statement announcing the start of a consultation into changes.
Among the options under consideration are blanket fee caps of 0.75 percent or 1 percent, and allowing fees above 0.75 percent only when an employer seeks a special exemption.
Reducing an annual fee from 1.5 percent to 0.75 percent would give someone who saved 100 pounds a month for 46 years an extra 100,000 pounds at retirement, the government said.
The Association of British Insurers reacted cautiously to the proposals, saying it was worried that a formal cap might encourage some pension funds to raise charges up to that level.
"It is important that any cap doesn't have the effect of levelling charges up," said ABI director general Otto Thoresen, adding that Britain's Office of Fair Trading had concerns about this in a previous study which argued against a cap.