UK. Parliament moves to ban flat fees on small pots
The move comes almost exactly a year since the Department for Work and Pensions formally proposed the ban in response to the review of the default fund charge cap.
At that time, research from the Pensions Policy Institute estimated that the number of small, deferred pots in master trusts could surge from 8m to 27m by 2035, with the cost to members in fees and other charges reaching £1.2bn, in some cases wiping out small pots entirely.
While the industry was broadly supportive of the plan, several commentators have argued that it is a short-term fix that should not be seen as a substitute for measures to deal with the long-term problems posed by small pots.
In November 2021, when the DWP confirmed it was moving ahead with the proposals, Aegon pensions director Steven Cameron branded it a “symbolic gesture” that, while “understandable”, would make little difference to members in retirement.
“The decision means that those firms who have offered this choice of charging to employers, in return for a lower fund-based charge, will now need to update systems and communications ahead of the April 2022 introduction,” he said at the time.
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