I was contacted by the FT Adviser for my view on the recent proposals to limit Annual Management Chargess on pensions…
Annual Management Charges Cap for Pensions Could Deny Choice to Savers, Churcher Warns
Government proposals to limit AMCs on pensions to 0.75 per cent could stifle innovation and deprive savers of choice, Jim Churcher has warned.
The pensions manager at Abbott Laboratories told delegates at the National Association of Pension Funds’ conference that setting a cap would stifle competition on price, as asset managers running even simple funds would see that as the norm.
Although the department for work and pensions is delaying the implementation of charge caps, Mr Churcher said people look for things other than price when it comes to their pensions.
The argument was not against a basic model of DC fund with cheap fees, Mr Churcher said. He added that employers should be allowed to offer employees a model that is more sophisticated than the default scheme.
Simon Chinnery, head of UK defined contribution at JPMorgan Asset Management, agreed, saying that the real focus should be on income replacement rather than costs. He said: “We are in a deep rabbit hole with prices. Cheap, cheap, cheap will not do it. I hear the thunder of litigation hooves coming down the track.’’
In response to a question from the floor, both speakers agreed that the proposed cap on charges would treat the symptom of the disease rather than the disease itself.
This came as pensions minister Steve Webb tabled amendments to the Pensions Bill to force providers to disclose all costs on schemes, amid growing speculation that plans for a charge cap will be dropped altogether.
Justin King, chartered financial planner at Dorset-based MFP Wealth Management, said: “It looks like the government is realising that low pricing is incompatible with the layers of regulation in place to protect scheme members.”