• Text size      
  • Send this article to a friend
  • Print this article

Royal London chief warns pension charges cap to cost £1bn

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.

Contextual targeting label: 

Commenting & Moderation

We moderate all comments on HeraldScotland on either a pre-moderated or post-moderated basis.
If you're a relatively new user then your comments will be reviewed before publication and if we know you well and trust you then your comments will be subject to moderation only if other users or the moderators believe you've broken the rules

Moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours. Please be patient if your posts are not approved instantly.