Govt to cap deferred pension member charges

Legislation capping pension charges for workers who have built up pension rights but switched jobs has been announced by pensions minister Steve Webb.

The amendment to the Pensions Bill, part of a clutch announced today, reveals the government's intention to extend an existing reserve power to cap charges for these deferred members.

Webb said this would "enable government to protect all scheme members from high charges, not just active members".

The change is a crack down on active member discounts, employed by major pension providers such as Standard Life and Aviva.

TUC general secretary Brendan Barber said unions welcome the move.

"This shows ministers have heeded the warnings of unions and consumer groups that this is a scandal waiting to happen," he said.

"The industry may talk about active member discounts, but the correct term has always been deferred member penalties."

Which? chief executive Peter Vicary-Smith said: "Few people stick with one employer for their whole working life, so it is great news the government is taking steps to cap deferred member penalties.

"There is simply no justification for charging higher fees for members who have left a pension scheme. Over a number of years, this really adds up and could knock as much as a quarter off your income once you retire.

"Now the government must follow through by ensuring this amendment makes it into the final bill and cap deferred member fees at the earliest opportunity."

Webb also announced an amendment to clarify the exact legal meaning of defined contribution.

This follows on from the Department for Work and Pensions Supreme Court loss concerning the Imperial Home Decor pension scheme.