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Pension management firms warned over excessive charges Pension management firms warned over excessive charges
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Firms that overcharge for managing pensions on behalf of millions of workers are to have their fees capped under new legal curbs being drawn up by the government.Firms that overcharge for managing pensions on behalf of millions of workers are to have their fees capped under new legal curbs being drawn up by the government.
Steve Webb, the pensions minister, is to announce a consultation over the policy following concerns that many workers and ex-employees are facing excessive charges.Steve Webb, the pensions minister, is to announce a consultation over the policy following concerns that many workers and ex-employees are facing excessive charges.
An Office of Fair Trading report to be released on Thursday is thought to uncover widespread practices of ramping up costs, which wipe out pensions. It follows claims that some savers are losing more than a third of their pension pots in fees and commissions.An Office of Fair Trading report to be released on Thursday is thought to uncover widespread practices of ramping up costs, which wipe out pensions. It follows claims that some savers are losing more than a third of their pension pots in fees and commissions.
The consumer watchdog's report comes months after the government introduced rules forcing companies to pay into a pension for their workers for the first time.The consumer watchdog's report comes months after the government introduced rules forcing companies to pay into a pension for their workers for the first time.
Experts fear many are being signed up to schemes that could charge sky-high fees, meaning paying into them is a waste of money.Experts fear many are being signed up to schemes that could charge sky-high fees, meaning paying into them is a waste of money.
All workers aged between 22 and the state pension age who are not currently members of a scheme are in the process of being signed up to one.All workers aged between 22 and the state pension age who are not currently members of a scheme are in the process of being signed up to one.
Webb is proposing to cap charges for workers who are being "auto-enrolled" into pension schemes by their employers.Webb is proposing to cap charges for workers who are being "auto-enrolled" into pension schemes by their employers.
Pension firms could also be banned from ramping up their charges for workers who move jobs but leave money in their old pension scheme.Pension firms could also be banned from ramping up their charges for workers who move jobs but leave money in their old pension scheme.
The proposals represent a new government policy of intervention in the pensions market.The proposals represent a new government policy of intervention in the pensions market.
Webb said he will launch a consultation this autumn before drawing up minimum quality standards for workplace pensions including a charging cap for automatic enrolment schemes.Webb said he will launch a consultation this autumn before drawing up minimum quality standards for workplace pensions including a charging cap for automatic enrolment schemes.
"Some of the inflated charges we have seen in the past will be unacceptable in the future," he said."Some of the inflated charges we have seen in the past will be unacceptable in the future," he said.
It is believed that Webb, a Liberal Democrat minister, has gained support for the cap of up to 1% from Iain Duncan Smith, the secretary of state for welfare and pensions.It is believed that Webb, a Liberal Democrat minister, has gained support for the cap of up to 1% from Iain Duncan Smith, the secretary of state for welfare and pensions.
At present about four million people in the UK are saving into a defined contribution pension scheme. Last October the government introduced automatic enrolment, an initiative that requires employers to pay into a workplace pension scheme for all staff unless they opt out. By 2018 an additional six to nine million workers will be signed up to a scheme.At present about four million people in the UK are saving into a defined contribution pension scheme. Last October the government introduced automatic enrolment, an initiative that requires employers to pay into a workplace pension scheme for all staff unless they opt out. By 2018 an additional six to nine million workers will be signed up to a scheme.
Ministers are concerned that because pension schemes are chosen by employers for their workers they do not necessarily have the incentive to find the best deal.Ministers are concerned that because pension schemes are chosen by employers for their workers they do not necessarily have the incentive to find the best deal.
They are also worried that workers are vulnerable to pension providers quietly pushing up their charges once they have signed up a firm as a client.They are also worried that workers are vulnerable to pension providers quietly pushing up their charges once they have signed up a firm as a client.
Ministers are keen to demonstrate that they have got to grips with the problem before the OFT's findings are released.Ministers are keen to demonstrate that they have got to grips with the problem before the OFT's findings are released.
Legal changes are expected to be pushed through over the next year amid concerns over "rip-off" schemes.Legal changes are expected to be pushed through over the next year amid concerns over "rip-off" schemes.
The consumer charity Which? has called for a ban on "two tier" pensions for those who have left a company but remain in a scheme.The consumer charity Which? has called for a ban on "two tier" pensions for those who have left a company but remain in a scheme.
It found evidence of firms charging an annual management charge of between 0.5% and 0.7%, doubling to 1.2 to 1.5% if a person leaves the company and stops paying into the pension.It found evidence of firms charging an annual management charge of between 0.5% and 0.7%, doubling to 1.2 to 1.5% if a person leaves the company and stops paying into the pension.
The OFT's market study will focus on value for money and the size of pension pot that savers end up with at retirement. It is expected to express concerns over the difficulties of ensuring that pension providers compete with one another and how the market may develop over time.The OFT's market study will focus on value for money and the size of pension pot that savers end up with at retirement. It is expected to express concerns over the difficulties of ensuring that pension providers compete with one another and how the market may develop over time.
It is also expected to say that there is insufficient pressure on pension providers to keep charges low.It is also expected to say that there is insufficient pressure on pension providers to keep charges low.
The plans are expected to be greeted with caution by Labour, which has expressed concerns over pension management charges on many occasions. Ed Miliband has previously claimed that pension charges are scandalous and called for widespread intervention, including caps, in the pensions market.The plans are expected to be greeted with caution by Labour, which has expressed concerns over pension management charges on many occasions. Ed Miliband has previously claimed that pension charges are scandalous and called for widespread intervention, including caps, in the pensions market.
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