By Adam Cadle
Labour leader, Ed Miliband, has been accused of “scaremongering” about current levels of pension charges after he declared that the next “massive, massive” issue to address will be the pensions industry as a whole.
According to a report published in the Guardian, at Westminster press gallery yesterday Ed Miliband said he was thinking of imposing a cap on charges, as a four per cent or five per cent pension charge is normal.
“I am very worried about the scale of administration charges that people face. What you find in some parts of the industry – not all parts, clearly – is that people are facing not 0.5 per cent, which is the benchmark administration fee that we put forward in the government scheme when we were in government, but 4 per cent or 5 per cent.
“Four or five per cent might not sound enormous, but it could mean up to half of people’s investment is wiped out and we have got to do something about that. We have got to drive down these administration charges and we can’t allow people to be ripped off in the way some people are,” Miliband said.
The Association of British Insurers has condemned Miliband’s speech however. ABI director general Otto Thoresen said: “It is absolutely wrong to imply that a 4 per cent or 5 per cent pension charge is normal. Pension charges have been falling steadily for the last decade and are continuing to fall. In newly set up automatic enrolment schemes the average annual management charge of our members is 0.52 per cent. The average annual management charge for existing schemes is 0.77 per cent.
“Nobody in the pension industry would defend a charge of 5 per cent for a standard new pension and we ask Ed Miliband to write to us with details of the schemes that he is referring to.”
Thoresen added that now is a “critical time for pension saving” and “scaremongering” about charges risks putting off many people from saving into a pension.