Commenting on the Department for Work and Pension’s call for evidence on costs and charges, Darren Philp, Director of Policy at Smart Pension, said:
“The pension charge cap has been effective and has done its job. We would caution DWP to think very carefully before they make any further changes.
“Including transaction costs under the charge cap could be counterproductive and would fetter scheme’s decision-making. Far better in our view to have a ‘comply or explain’ system for transaction costs where transparency and reporting can ensure these are proportionate and not excessive.
“We understand DWP’s concern around small pots being eroded under flat fee charging structures, but believe that the first action should be to resolve this issue rather than mess around with the charge cap. Pension Dashboards will help, but exploring ideas like allowing providers to actively consolidate small pots in active schemes, allowing micro refunds, or extending the auto enrolment opt out window are all ideas worth considering. If the DWP is minded to introduce a de minimis then it should be simple and set at a value that allows providers to recoup costs and not be forced to make a loss.”