Insurers win again as pension charge cap is blocked


LibDem Annual Conference

The UK's biggest pension companies must have kicked their feet up and rewarded themselves with a big fat cigar last week after managing to kick the issue of a cap on pension charges into the long grass, at least for another year.

Pensions minister Steve Webb has capitulated to the ferocious lobbying of the FTSE insurers and agreed to give them 12 months breathing space before a pension charge cap is introduced.

Of course he didn't explicitly say he was doing it for the insurers, he's more diplomatic than that – he said that it would give employers some breathing space as they already had a lot on with auto-enrolment.

Frankly, I can't see how reducing the charges on pension contracts affects employers at all, surely it's a good thing as they can offer their employees an even better deal.

It doesn't matter what the excuse is, it's clear that the big boys in pensions were running scared of the threat of a cap and rather acknowledge that maybe things had got a bit out of control with the opaque charges and maybe it was time to treat customers a bit more fairly, they brought out their guns and started shooting. Instead of seeing it as a wake-up call, they saw it as a battle and their aim was to preserve the status quo.

So now the cap – which was to be set between 0.75% and 1% - will not come in until April 2015 but there is a very big problem with this date. It's a little bit close to the next general election.

Let's be honest, it's unlikely that Webb will make it unless we have a re-run of the last election and the Lib Dems become kingmakers and we are stuck with a coalition that no-one really voted in.

If there is an outright winner this time then I think we can safely say it won't be the Liberals and that's bye-bye Webb and probably bye-bye cap. The insurers just need to keep lobbying that bit harder next year, causing more delays to the implementation of the cap then the election will be upon us. Once the election is out the way the new kings of the castle will have bigger fish to fry.

Maybe the idea of the charge cap will be but a distant memory of a time when we thought that pensions were going to get the shake-up they needed.