Potential increase in ‘charge cap’ on pension schemes would allow greater investments in ESG funds

by | Mar 3, 2021

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A potential increase in the ‘charge cap’ on pension schemes could make higher return funds more accessible to the general public, including ESG funds, says Bowmore Financial Planning, a chartered financial planner for private clients, trustees and corporates.

The Government announced today that it will consult this month on whether to increase the charge cap (currently 0.75%) for defined contribution pension schemes. The charge cap is the highest possible fee that defined contribution pension funds can pay for their investments.

Increasing the cap would give DC pension schemes the ability to invest in a greater number of assets, including those with strong ESG principles, which in general charge higher fees. Those higher fees mean many ESG funds are out of the reach of defined contribution workplace pension savers.

 

Gill Millen, Managing Director of Bowmore Financial Planning, says: “Any potential increase in the charge cap on DC pension schemes would make ESG funds far more accessible to the general public. As ESG funds have traditionally charged higher fees, people with workplace pensions haven’t been able to access them.”

“More and more employees want to invest ethically so it is important that they are allowed to access a wider universe of ESG funds.”

“Raising the cap could enable pension providers and investment managers to create more ESG funds for the general public to invest in. This would not only help to build better outcomes for members of workplace pensions, but also support the UK’s objective to become a more sustainable economy as we emerge from the Covid-19 crisis.”

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