Leading pensions company Royal London has said the 0.75 per cent charge cap on workplace pensions will cost the industry £1billion, five times the goverment's estimate.
Phil Loney, chief executive of the mutual which this year dropped its Scottish Life brand, said: "With the charge-capping and other reforms introduced by the Government to the group pensions market, we are beginning to see the first signs that this headline-grabbing policy will have precisely the opposite consequence to that which is intended."
Mr Loney said pensions minister Steve Webb had said pensions companies' total revenue would be cut by £200million over a 10-year period, but the provisions already made by the major players suggested this was a gross under-estimate.
He went on: "This seems to me to be an unacceptable margin for error in the government's understanding of the impact of its actions, and the size of the impact is driving many insurers to introduce employer fee arrangements to mitigate against the impact of further reductions in the price cap. I hope that present and future governments will think carefully about these consequences before lowering the cap further...."
Royal London was reporting a 45 per cent drop in embedded value pre-tax profit after taking a £61m provision for the effects of the charge cap and other changes.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article