The UK government will relax rules shielding tens of millions of UK retirement savers from high charges as it aims to channel billions of pounds of pension fund cash into longer-term investments such as start-ups and infrastructure.

The government on Monday confirmed plans to exempt performance fees from an annual 0.75 per cent cap on annual charges that can be levied on auto-enrolled pension savers. The cap has long been seen by the industry as a barrier for many “defined contribution” pension schemes to investing in less-liquid assets, whose managers typically charge performance-related fees.

The shift is part of a wider drive by ministers to unlock pension assets to assist with the government’s “levelling up” agenda, by encouraging schemes to diversify away from heavily-traded stocks and bonds into illiquid assets. However, critics say it opens the door for millions in pension savings to be siphoned off into hefty fees.

“This is bad news for defined contribution pension savers,” said John Ralfe, an independent pensions consultant. “The emphasis should be on simplicity and keeping costs low. This is open season for snake oil salesmen.”

During the consultation process on the reforms, concerns were raised about the impact of performance fees on members, who have no guarantee that paying higher fees will generate better returns for their retirement. Before entering into any performance fee agreements, the government expects pension trustees to seek professional advice to ensure member interests are protected.

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