Legal & General (L&G) is "demanding" the government lowers a pension charge cap to 0.5%, but one expert says imposing a cap simply pushes costs elsewhere and would leave hundreds of thousands of businesses "to pick up the bill".
L&G has challenged the Department for Work & Pensions' (DWP) proposal for introducing a 0.75% charge cap, saying it is in favour of a "meaningful" charge cap at 0.5% for both new auto-enrolment schemes and legacy pension schemes.
Lowering the charge by 0.25% could reduce charges for a saver starting a workplace pension at age 22, and paying £100 per month, by as much as £40,500 by the time they retire.
Conversely, a cap of 0.75% will potentially cost legacy pension scheme savers £4.3bn in lost savings, it added.
"On behalf of the UK working population, we are demanding the government lowers the cap on pensions charges to 0.5%," the provider said in a statement.
L&G adds its name to that of consumer group Which? after it said earlier this month that a cap should be reduced to 0.5% and extended to all funds, not just those used for auto-enrolment, though many advisers panned Which?'s position.
"Clearly, if we had an overwhelming response for something different, we would look at that," he is quoted as saying.
L&G's stance appears at odds with other providers, including Aegon, which has stated that, though lower charges "have obvious surface appeal", they can also "produce adverse consequences for customers", such as poorer service levels and less choice.
Stakeholders have challenged the concept of a charge cap.
Tom McPhail, head of pensions research at Hargreaves Lansdown, who has previously suggested IFAs could be among the first casualties of a charges cap, has said it is "important to note" that imposing a cap "doesn't make the costs disappear".
"You just push [the costs] somewhere else and it will be small businesses that have to pick up the bill", he said.
A price cap below 1% would costs hundreds of thousands of businesses additional costs in establishing schemes, he added.
"Whilst it is essential to ensure that scheme members all enjoy a good deal on their retirement savings, it is also important to be careful what you wish for," he said.
L&G Assurance Society CEO John Pollock, making the case for a 0.5% cap, said: "A pension charge cap at 0.75% is a poor idea by the government. Not only will it potentially cost legacy scheme pension savers £4.3bn in lost savings, it will also be ineffective in driving down pension charges for millions of savers.
"The Office of Fair Trading state typical new auto enrolment schemes actually charge 0.51%. Having a cap at a much higher figure will have no impact on new pension schemes, and will result in legacy savers being treated unfairly compared to new savers.
"Legal & General is in favour of having a meaningful cap at 0.50%, not only for new auto enrolment schemes, but for legacy pension schemes as well. It is here in the legacy world that savers maybe getting a poor deal, with fees at much higher levels. Competition is driving down the cost for new auto enrolment schemes, but is having no real impact on legacy schemes because employers have historically rarely switched suppliers."
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