The Government’s introduction of workplace pensions to the market was intended not only to solve the issue of fewer companies offering lifelong pension schemes, but to tackle the troubling lack of saving habits among younger savers and those who move jobs regularly.
With costs and charges having a significant impact on how much of a saver’s pension pot they end up taking home, there has understandably been much concern surrounding a suggested introduction of higher charges for some workplace pensions.
As a result, a basis point cap of 75 (0.75%) was introduced in April of this year, for those who were auto-enrolled into a qualifying workplace pension scheme. The charge cap intends to restrict the fees that members can be charged in a default scheme to 75bps.
Yet with concerning discussion arising surrounding a possible review of this charge cap, it is important to consider value for money and member outcomes, as well as a number of wider implications, from pricing trends and sustainability to competition at all levels across the board.
Could a reduction in the price cap lead to a small number of providers, all offering the same?
Having the ability to provide innovation requires investment in products. With the auto enrolment process coming to an end and employers having ticked the regulatory box, determining their decision on a provider by cost, amongst other parameters, it is important to consider whether these products offer enough variety.
How can BlueSky assist?
At BlueSky we provide exceptional pension scheme products, TBPS and Crystal, within the 75bps charge cap. A reduction in this cap would undoubtedly result in a market full of mimicking products, with restricted investment offerings and hindered administration development.
If the charge cap is reduced, to say 50bps, the market may end up full of identical products.
While BlueSky have the ability to offer an all-in solution at 40bps per annum, we choose only to provide this to clients in exceptional circumstances. We instead encourage employers and schemes to assess our different offerings, which are all within the existing charge cap.
In the latest video BlueSky Chief Executive Officer, Paul Bannister, discusses in further detail the concerns surrounding a reduction to the charge cap, and why we firmly believe it should remain at 75bps.
To learn more about how BlueSky can assist you with workplace pensions, get in touch today. Call us on 01322 308 249 or visit our contact page to speak with a member of our expert team