Introduction of a cap on fees charged in workplace defined contribution plan offerings will be delayed for 12 months, U.K. Pensions Minister Steve Webb announced Thursday.
Mr. Webb said any cap on fees will not be introduced before April 2015 to give employers time to prepare for complying with automatic enrollment requirements, which were introduced to U.K. businesses in October 2012. Following the pension reforms, all qualifying U.K. employers must provide employees with access to a DC plan or enroll employees into the government's fund, the National Employment Savings Trust.
“This government is committed to tackling high charges” in workplace retirement plans, Mr. Webb said in a notice published Thursday on the Department for Work and Pensions' website.
The government previously sought input from the U.K. retirement industry on how retirement plan fees might be structured to ensure participants got the best value for their money. That consultation period closed in November.
Among its consultation proposals was a cap on fees charged of between 0.75% and 1% of the value of the saver's pot.
“We remain strongly minded to cap (retirement plan fees) in the default funds used for automatic enrollment. However, have consistently encouraged firms to start getting ready for automatic enrollment 12 months ahead of the time the new employer duties apply to them. Therefore, to give those employers at least 12 months' notice of the rules that will apply to them; I can confirm that any cap on charges will not be introduced before April 2015,” Mr. Webb said in the notice.
While the delay may not be good news for plan participants, who might still have to pay higher charges in the meantime, the postponed introduction was welcomed by the pensions industry.
“Providing these employers with at least 12 months' notice of any changes in the rules relating to charges is a sensible step,” said Helen Forrest, head of policy at the National Association of Pension Funds, in a news release on the ministerial statement.
“While this delay will create uncertainty for both the industry and pension schemes in the short-term, it should allow schemes the opportunity to plan ahead,” said Simon Foster, head of corporate life and pensions, U.K. and international savings at Zurich Insurance Group, in an e-mail.
Mr. Foster said Zurich supports a fee cap of 0.75%, with a higher option of 1% “if there is clear proof that (providers) are delivering additional value to employees.”