Pension charge cap assessment deemed ‘not fit for purpose’

The Regulatory Policy Committee at the Department for Business has ruled that the Department for Work and Pensions’ (DWP) impact assessment on a pension charges cap is ‘not fit for purpose’.

The DWP launched its consultation in October, which included a cap on pension charges at 0.75%.

The Regulatory Policy Committee said the evidence presented by the DWP did not adequately demonstrate that a cap on pension charges would have a zero net impact on the pensions industry.

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In addition, it said that robust estimates for all options needed to be presented, so that consultees, and ultimately the final policy decision, are informed effectively.

A DWP spokesperson said: “We do not agree with this rating, which has no implications either for our proposals or for the consultation process.

“The reason for consulting on a charge cap was to gather evidence about the potential impact of our proposals on savers and the industry.

“Our final decision will be based on evidence we have received, not on our initial impact assessment.”

Tom McPhail, head of pensions research at Hargreaves Lansdown, said: “The DWP conducted this consultation in a tearing hurry. In fact, it rushed it through so quickly that they failed to conduct their regulatory impact assessment properly.

“This means that the entire consultation process is now in doubt and will probably have to be rerun.

“If the impact assessment figures were wrong then everyone involved in the consultation including employers, pension providers and the DWP’s own officials will have to reconsider their conclusions from the consultation.

“This will almost certainly mean a delay in the introduction of any charge cap on pensions, if one is introduced at all.”