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Pensions savers face higher charges in 'levelling up' drive

·2-min read
boris and ministers
boris and ministers

Pension savers risk being hit by higher fees as the Chancellor seeks billions of pounds for the Government’s “levelling up” agenda.

Ministers are reportedly looking to ease rules protecting tens of millions of UK retirement savers from high charges as they eye pension fund cash to invest in long-term projects.

Policy advisers are working on proposals to dilute the 0.75pc cap on annual management fees, which was introduced five years ago to protect workers auto-enrolled into workplace pensions, the Financial Times reported.

The move is meant to help Rishi Sunak, the Chancellor, to raise fresh funding that would go towards Prime Minister Boris Johnson’s pledge to boost spending in the North and Midlands.

The Government called for the City to seek out "British success stories" earlier in the summer, and said it would encourage an "investment big bang" in which pension funds would put more money into long-term UK assets and projects.

Policy initiatives meant to deliver on the “levelling up” agenda are expected to be a big theme of Mr Sunak’s Budget this month.

The proposals to dilute the charge cap, which would be subject to consultation, suggest that the Treasury is increasingly looking to encourage defined contribution (DC) pension funds to invest more widely in British assets.

Many of these assets are held in funds managed by private equity and venture capital firms, which commonly charge performance fees linked to certain thresholds on annual returns.

DC pension managers have typically shunned investing in PE and VC funds, largely due to concerns that these fees would breach the 0.75pc charge cap.

Mr Sunak and Therese Coffey, the work and pensions secretary, believe the proposed reforms would allow pension savers to access funds offering better returns by investing in longer-term assets, according to reports.

Last month, a working group headed by the Treasury, Bank of England and Financial Conduct Authority recommended the Government further review the charge cap, to help stimulate material investment by schemes in illiquid assets.

A spokesperson for the Treasury declined to comment.

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