The cap, which is part of its consultation work on minimum standards for workplace pension schemes, excludes transaction charges.
Hargreaves Lansdown head of pensions research Tom McPhail says: “It is vital that pension scheme members can have confidence that their workplace pension will give them good value for money. Today’s announcement addresses this issue and means that even if they can’t afford a Lamborghini at retirement, at least pension investors won’t be helping to pay for the fund managers’ new sports cars.
“There is a huge amount for the pensions industry to deal with at present, not least as a result of last week’s budget announcement, so it is entirely sensible that the government has given the industry some reasonable time to accommodate these changes. Given the additional requirements (and costs) now being placed on pension providers to give better guidance to their members at retirement, it is also sensible to not set the charge cap any lower at this stage.
“The charge cap will only apply to default funds at the outset. This is a sensible decision as it would be wrong to prevent investors from benefitting from specialist active management if they wish to do so.”