Pensions Minister Steve Webb announced today that a pension charge cap is currently not needed within the industry, unless there is significant evidence that people are being enrolled into poor value pensions.

Speaking to the Work and Pensions Committee today, the pensions minister stated that there was no need to set a cap because there is currently a lot of choice inherent within the market.

He applied the “baked bean test” to the situation and said: “Why doesn’t the government set a price cap on a tin of baked beans? We don’t need to because there’s a vibrant market, people have lots of choice.”

Webb argued that it would be extremely difficult to determine what the charge cap would be if it were to be imposed. “The cap on stakeholder schemes was set at 1.5 per cent but if you were paying that now while the person next to you was enrolled in a scheme paying 0.5 per cent you would be outraged. Yet that was seen as a reasonable charge cap at the time.”

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