This weekend work and pensions shadow Rachel Reeves told the BBC that a Labour government would introduce a 0.75 per cent cap as a matter of urgency and that charge would fall to 0.5 per cent within the lifetime of the Parliament.
She also said Labour would introduce a requirement for all savers to be referred to an independent broker to make sure they get the best deal when they turn their pension savings into retirement income. The average saver could be £400 a year better off from shopping around for the best deal, she argued.
Advisers have called for greater clarity around the Labour proposals and have questioned whether brokers should be mandatory.
Reeves also pledged to force pension providers to reveal the full range of charges and transaction costs.
A Labour government would also introduce new rules that would require all pension providers to legally put the interests of savers first rather than “allowing their savings to be siphoned in profits for pension providers and fund managers”.
Reeves said her party would ensure costs kept coming down by making sure that inefficient pension providers with high charges are forced to improve or merge.
Reeves said: “Millions of people who are working hard to save for their retirement face losing thousands of pounds because of David Cameron’s failure to fix the broken pensions market. Rip-off pension fees and charges are costing savers thousands of pounds. An astonishing £1billion a year is lost because people aren’t offered the best deal when they approach retirement.
“A Labour government will ensure independent brokers help people turn their hard-earned private pension pots into a secure retirement income, saving thousands of pounds. We will also make sure that savers income is protected from excessive fees and charges.
“Millions of savers facing the cost-of-living crisis are paying the price for the government’s failure to step in and fix the broken pensions market. Labour will protect people’s pension savings from rip-off fees and charges and reward people who save for their retirement.”
Barnett Waddingham consultant Malcolm McLean says: “Whilst it is helpful for everyone – public and pension practitioners alike – to know in advance what the opposition plans for pensions might be, there is, unfortunately, a distinct lack of clarity as to exactly how these proposals might work in practice and what the longer term impact might be.
“Crucially there is no indication as to precisely when the 0.75% cap would come into force – presumably not before 2016/17 – and whether the subsequent reduction to 0.5 per cent would apply to all schemes, just new ones going forward or retrospectively to those schemes who had already enrolled prior to the caps coming into force. All of this needs to be known and taken into account by those whose staging dates for the rolling programme of auto-enrolment have yet to be reached.
“Similarly, it is surprising to note that Labour plans to introduce a requirement for all savers to be referred to an independent broker to make sure they get the best annuity deal possible – seemingly disregarding the fact that brokers do not give financial advice – they are essentially a non-advised service – and are not accountable for any actions the saver may take in consequence.
“Whether Labour is suggesting, or at least implying, that a brokerage service is preferable and/or less expensive, which it often isn’t, to that of an IFA is not clear but, if it is, it is a very dangerous path to go down given the complexity and lack of consumer familiarity with the whole decumulation process.
“We need a lot more clarity and possibly a slight change in emphasis if the Labour pension policy is to deliver what we would all like to see – making sure savers get the best deal possible from their pension plans thus enabling them to retire with a degree of comfort and at a time which suits them best.”