Auto-enrolled to be spared advisory fees
Employees automatically enrolled into a company pension will not have their retirement pot reduced by charges from consultants, the government has said.
Currently, firms can give advice to employers but take their fees from employees' pension pots.
The government scheme of auto-enrolling workers into company pension plans - workers must opt out if they do not want to join - means the number of pension scheme members is expected to soar over the next few years.
Companies with more than 120,000 employees introduced auto-enrolment last October, and more companies will begin enrolling workers over the next few years. The smallest firms will start auto-enrolling in 2017.
Consumer groups welcomed the plan to ban the practice of taking consultancy fees from pensions. Adam Phillips, Financial Services Consumer Panel chair, comments: "Consultancy charging would have taken significant money from member contributions in the first two years of membership.
For frequent job changers, the impact would have been pernicious. They would have suffered losses every time they joined a new employer's scheme."
The government recently unveiled another measure to help pension savers. It plans to introduce an automatic transfer system next year for small pension pots of up to £10,000.
Currently, most employees leave their pension with their previous employer, meaning they build up multiple pension pots - and in some cases forget about them. Pensions minister Steve Webb says that by 2050 the transfer system could halve the number of dormant pension pots.
As with auto-enrolment, the system of automatic transfers will offer an opt-out.
In exchange for any lump sum – usually your pension fund – an annuity is “bought” from an insurance company and provides an income for life. When you die, the income stops. Annuity rates fluctuate daily and depend on your sex (although from 21 December 2012 insurers will no longer be able to use gender as a factor when calculating annuities), age, health and a number of other factors, so you have to pick the right one and, once bought, its terms cannot be altered, so seek financial advice.