Government to get tough on pension charges
Writing in The Telegraph today pensions minister Steve Webb warned that he would not hesitate to take action on pension charges.
Mr Webb reminded the pension industry that the government has the power to cap pension charges and would use this power if it felt consumers needed protection.
He is writing ahead of the introduction of auto-enrolment in October, when employers will be required to automatically enrol workers into a workplace pension scheme if they are not already contributing to one.
Auto-enrolment is part of the government’s effort to address the growing pension crisis in the UK.
With the recession causing pressure on incomes and annuity rates plummeting, many people are facing a less than comfortable retirement.
It is estimated that around 11 million people in the UK are failing to save enough for their retirement.
Mr Web highlighted the problem of exit fees on historic pension policies.
Although the government does not have the power to force pension providers to reduce or cancel these fees, he warned that the reputation of the industry could suffer if they insist on enforcing punitive exit penalties.
In his article Mr Webb wrote: “I would like to see the leading companies look again at their ‘back book’ of old pension policies.
“They should ask themselves if the battered reputation of their industry would not be greatly enhanced if they were to revisit these schemes and offer scheme members fairer terms.”
Meanwhile, a survey by Prudential has revealed that higher-rate tax payers are failing to claim the tax relief they are entitled to, on extra pension contributions.
Nearly 60 per cent of taxpayers fail to claim back the extra 20 per cent they are entitled to.
In total, this means they are missing out on a combined £295.8 million each year in extra pension contributions.