Royal London has launched a blistering attack on the UK government’s plans to cap charges for workplace pension schemes.
Chief executive Phil Loney has previously described the 0.75 per cent limit on group pension fees as “bad economics” and today said the changes, which are due to come into effect in April, could cost the insurance industry £1 billion.
He said the mutual insurer supported the overall trend towards lower charges, but claimed pensions minister Steve Webb had given a “gross underestimate” of the cap’s impact.
Loney added: “Webb told parliament that pensions companies’ total revenue would be reduced by £200 million over a ten-year period.
“We estimate that the total reduction in long term insurer income may well reach £1bn.”
In response, a spokesman for the Department for Work & Pensions said: “We’re taking action to ensure workers have access to good quality pension schemes, protected from high and unfair charges.
“This is important as automatic enrolment will lead to around six to nine million people newly saving or saving more into a pension, generating an extra £11bn a year in pension savings. These people must be able to save for retirement with confidence.”