New research from the Department of Work and Pensions has revealed that as many as 98 per cent of members of qualifying contract-based schemes and 99 per cent of members of qualifying trust-based schemes now paid a maximum of 0.75 per cent, contradicting the often made claim that people are being 'ripped-off' by pension charges.
The research team worked with 14 pension providers and 237 unbundled trust-based schemes to collect charges data covering 15.1 million pension pots across 228,000 employers. The research was the result of a Command Paper published in 2014 by the Department of Work and Pensions which announced a comprehensive range of charges measures designed to improve the value for money of defined contribution (DC) workplace schemes, including a charge cap of 0.75 per cent on default arrangements. Commenting, former Pensions Minister Sir Steve Webb said:
"Members of workplace pensions are paying less than a penny in the pound to save in a workplace pension. For every pound that they save, their employer will often contribute an additional pound, and their pension contributions also attract tax relief. For an investment of 80p after tax relief, a worker can get two pounds in a pension, and less than two pence of this will pay for the cost of running the scheme. This is incredible value for money and explodes the myth that anyone in a pension is at risk of 'rip-off' pension charges".
The Department of Work and Pensions has also announced plans for greater transparency in pension scheme charges.
"Well run schemes should have nothing to fear from greater transparency on costs and charges. Trustees and governance committees will welcome additional information which will help them to ensure that their members' money is invested in a way which delivers maximum value-for-money" Sir Steve Webb added.