Whilst a cry for help from the pensions industry that it isn’t being allowed to charge enough is a narrative which is never going to play well, there are industry concerns that the DWP has been over-zealous in its implementation of the charge cap.
] Phil Loney of Royal London has spoken out against the DWP’s pension charge cap, arguing that it may do more harm than good. Its consultation on the charge cap was deemed not fit for purpose, yet it pressed ahead anyway. Now the insurance industry, Royal London today and Standard Life and Scottish Widows before them is now making substantial provisions to cover the loss of income from the introduction of the charge cap. So what are the possible consequences of this?
Pension schemes may simply reduce the quality of member services. Compromises can always be made on service, member engagement, active management, systems development; these are not easy to measure and so no one, certainly not the Pensions Minister, will be held to account for them. Life will just get a little less good. Pension schemes may be forced to find efficiencies and to deliver better value for money. This may happen but the evidence from the insurance companies suggests otherwise.
Employers may have to pay more in the way of fees to help cover the cost of running the schemes. This seems the most likely outcome. In turn they will either pass these costs on to shareholders in the form of lower dividends or on to employees in the form of lower wages. It is hard to see how anyone wins from this. It is a great shame that the DWP lacks the necessary evidence to prove that its decision in this matter was well founded.
