Pensions minister Steve Webb has compared the 1% cap set for stakeholder pensions over a decade ago with the 0.5% or less being charged by providers such as Now:Pensions and People's Pension and said: "Are we really saying we can't do any better than 10 years ago when we don't have to sell the darned things?"
His comments to the National Association of Pension Funds annual conference in Manchester last week came as the pensions industry braced itself for a wave of entries into auto-enrolment by medium-sized companies over the next few weeks.
From November 1, all firms with 500 or more workers will see new deductions on their payslips, though the initial contribution rate is a mere 1%. It will be 2017 before all employees have to be enrolled in a company-sponsored scheme.
The Office of Fair Trading last month urged Mr Webb's department to launch an immediate consultation on the cost and quality of schemes, and on how to outlaw schemes using in-built adviser commissions or higher charges for deferred members.
The minister said the cap should be as low as possible, especially where "people have their money taken out of their pay and invested in a pension they never chose". Mr Webb also showed he wanted to introduce "pot follows member" plans for people who move jobs.