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Ban on letting agent fees introduced as draft bill

The government will today introduce a draft bill to parliament to ban letting agents from charging tenants fees in England, as it pushes ahead with reforms in the private rented sector. The proposed ban, originally laid out in last November’s Autumn Statement[1], has now moved a step closer to being brought into law. It will form part of the draft Tenant Fees Bill, which the government claims will ‘help millions of renters by bringing an end to costly up-front payments’.

How would a letting fees ban work?

Under the legislation, letting agents would be prohibited from charging tenants a fee to rent a property.

Currently, the fees charged to tenants are ‘often not clearly or consistently explained’, the government said in a statement. The ban would also prevent agents ‘double-charging’ landlords and tenants for the same services. When the government consulted on the proposed ban, seven in ten tenants said letting agent fees currently affected their ability to move into a property.

The draft bill also proposes capping holding deposits at no more than one week’s rent and security deposits at no more than six weeks’ rent. It also aims to to set strict rules on how and when holding deposits should be returned to tenants.

Which? backs ban on letting agent fees

Responding to the government’s announcement, Alex Neill, Which? managing director of home products and services, said: ‘Navigating the rental market is stressful and expensive.

It’s right for the government to ban unfair fees, as this will help renters with the significant costs of moving home.’ ‘This new law must also be enforced so letting agents don’t abuse the system.’

Criticism of a proposed fee ban

While tenants are likely to welcome lower and more clearly-designated fees, questions remain about how the ban would work in practice. Letting agent association ARLA Propertymark has previously claimed that shifting letting costs to landlords may result in tenants paying higher rents.

A ban on letting fees for tenants was launched in Scotland in 2012, and the Welsh government has expressed an intention to follow suit. Currently, the Northern Irish government is considering its options regarding reforms to the sector.

Fee protection consultation launched

The government has also launched a consultation today on making membership of client money protection schemes mandatory for letting and managing agents. This move would add an extra layer of protection for landlords and tenants, and has long been called for by ARLA Propertymark.

The latest consultation comes hot on the heels of calls for evidence on leasehold issues,[2] managing agent fees[3], and reforming the home buying process[4].

References

  1. ^ last November’s Autumn Statement (www.which.co.uk)
  2. ^ leasehold issues, (www.which.co.uk)
  3. ^ managing agent fees (www.which.co.uk)
  4. ^ home buying process (www.which.co.uk)

Pension schemes to face £50,000 fine for failure to disclose fees

Employer pension schemes will be obliged to publish details of the fees charged to their members or face a hefty fine, under new proposals from the government. The announcement from the Department of Work and Pensions (DWP) will give members greater transparency around the fees charged to invest their funds – which can be up to 0.75% of their pension pot. Which? welcomed the move but called for the government to lower the cap on pension charges.

Pension fees to be disclosed From April 2018, workplace pension scheme[1] trustees could be required to inform members of all fees and charges associated with investing their pension, the DWP has proposed. If the changes were introduced, members would receive an annual benefit statement showing the fees they are being charged and how their money is being invested.

In addition, schemes would have to show members the compounding effects of the costs and charges on their pension savings over time. Employer pension schemes that fail to comply could face fines of up to ?50,000. Currently the proposal would apply to occupational workplace pension schemes, but the government plans to consult on corresponding rules for workplace personal pensions in the New Year.

Secretary of State for Work and Pensions David Gauke said: ‘For too long savers have been in the dark about where their pension is invested, what they are paying for, and why they are paying it.’ Find out more: Workplace pension schemes[2] – everything you need to know

How much can pension schemes charge?

In April 2015, the government introduced a cap on the default fees charged by auto-enrolment pension schemes – meaning consumers could no longer be charged more than 0.75% of their pension pot. From 31 March 2017, the government also introduced a cap on exit fees, so that members looking to leave or switch funds[3] could not be charged more than 1%.

New data from the government’s pension charges survey found that 98% of eligible members are currently being charged at or below the 0.75% cap. But the survey also found that members lacked transparency around fees and charges. The caps were introduced to coincide with with government’s April 2015 pension freedoms[4] reform, which gave people more control over their pensions savings.

Since October 2012, the government has also been gradually expanding auto-enrolment[5], which requires workers to be automatically placed in a workplace pension scheme. Find out more: Should I join my company’s pension scheme?[6]

Which? calls for 0.5% fees cap

Which? supported the proposal to increase transparency for consumers but urged the government to lower the cap on pension fees. Harry Rose, Which?

Money Editor said: “It is right that all consumers will finally be able to see vital information on their pension scheme fees and this transparency must be a key part of the pensions dashboard[7] when it is rolled out.

“The Government now needs to reduce the auto-enrolment charge cap to 0.5% at most, to ensure that consumers aren’t losing out on future retirement income.”

Find out more: Pensions auto-enrolment – what it means for you

References

  1. ^ workplace pension scheme (www.which.co.uk)
  2. ^ Workplace pension schemes (www.which.co.uk)
  3. ^ leave or switch funds (www.which.co.uk)
  4. ^ pension freedoms (www.which.co.uk)
  5. ^ auto-enrolment (www.which.co.uk)
  6. ^ Should I join my company’s pension scheme? (www.which.co.uk)
  7. ^ pensions dashboard (www.which.co.uk)

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