Government announces cap with effect from April 2015, a move that could spare savers fees worth up to £200m a year

This article is more than 6 years old

This article is more than 6 years old

Fees for managing pension pots will be capped at 0.75% from next year, following concerns that rip-off charges have been eroding the value of savings.

Steve Webb, the Lib Dem pensions minister, said the government would put pension charges in a vice and keep squeezing until there was a "full standardised disclosure of all costs and changes".

The new 0.75% charge will apply to auto-enrolment pension schemes from April 2015, potentially saving the public £200m a year.

Ministers have been considering a charge limit of somewhere between 0.75% and 1% for some time, but delayed confirming details until now.

The delay exposed the coalition to opposition attacks last week. Labour pointed out that nothing had been done about high charges despite the government's reforms announced in the budget allowing savers to withdraw large lump sums from their pension pots.

Labour has promised to cap pension pot fees at 0.75%, and then gradually reduce them further over the course of a parliament to around 0.5%.

Speaking in the Commons, Gregg McClymont, the shadow pensions minister, said that for the government to have adopted an opposition policy was "truly a success for Ed Miliband".

In October Webb launched a consultation on workplace schemes, saying that a limit on annual charges was one of the ways the system could be made fairer for consumers. He pointed to a report by the Office of Fair Trading "identifying no fewer than 18 different sorts of charges which can be taken from people's pensions".

Some pension providers, including Aegon, have warned that the 0.75% cap would not work for all schemes and urged the government to take more time to consider the issue.