6th March 2015
The Labour Party is proposing capping income drawdown charges. In a speech to be delivered later today, Labour leader Ed Miliband is expected to say: “We will act to protect savings by capping rip-off fees and charges on new pension products. People who draw money out of their hard-earned pension pot should have similar protections to when they put money in.”
The move follows a call for a cap for customers who default into drawdown with their existing pension provider from consumer group Which?.
Hargreaves Lansdown has criticised the price cap announcement for risking strangling the new pensions market at birth though it says it believes it could meet any capo. It has also questioned the Which? research and its proposal for a state-backed drawdown provider.
Tom McPhail, head of pensions research, Hargreaves Lansdown says: “We don’t think a charge cap is the answer to everything, however we have been offering a low cost drawdown plan for many years, so we are comfortable if anyone can meet a charge cap, we can. Consumers benefit from lower charges, but they also benefit from well-designed products, and timely help and guidance along the way. A charge cap threatens to strangle this new pensions market before it is even born, by stifling the investment and innovation it badly needs to deliver good outcomes for savers.
“Consumers are best served by a competitive marketplace which delivers a range of options for different investors, so they can pick the ones that most suits their needs. The biggest threat to pension savers is the risk of running out of money early, so they need to go into drawdown with their eyes open, or else buy an annuity. You simply can’t sleepwalk into a decent retirement income, and letting politicians decide the best way for you to draw your pension is a recipe for retirement ruin.”