U.K. Pensions Minister Steve Webb said the fees that pension providers will be allowed to charge on the default fund in new auto-enrollment plans will be capped at 0.75 percent.
Britain is currently rolling out a system under which all employees are signed up for pension plans unless they opt out. It’s expected to affect 10 million people. Webb set out new rules today for the charges such funds can levy, which he said would cost the industry about 200 million pounds ($330 million) over the next decade.
The announcement came after Chancellor of the Exchequer George Osborne used his March 19 budget statement to remove rules restricting how retirees are allowed to spend their pension pots, removing the requirement to buy an annuity.
“We are going to put charges in a vice and we will tighten the pressure, year-after-year,” Webb told Parliament in London. “This is a full-frontal assault on poor value-for-money from a government that is on the side of those people who save.”
In 2017, the government will look at lowering the cap on charges and making it include transaction costs, Webb said. Funds are also to be prevented from increasing charges to customers who have switched jobs and so are no longer contributing.