24 August 2012
The Association of British Insurers has set out an action plan
for clearer pension charges and costs in a letter to regulators
today. The move is designed to improve transparency across the
whole of the pensions industry and raise consumer confidence ahead
of the introduction of auto-enrolment into workplace pension
schemes this autumn.
The joint letter to the Pensions Regulator and the Financial
Conduct Unit of the FSA sets out clear priorities for action
towards developing an industry protocol by the end of the year that
will ensure:
- A consistent and simple disclosure of charges to employees
across contract and trust-based pension schemes. (These terms
are explained below).
- Transaction costs, such as broking fees, are made available to
employees in all contract and trust-based schemes.
- All employees receive regular, clear and meaningful information
on charges and transaction costs as their funds build up.
- Existing workplace pension schemes to ensure that employees are
provided with clear and comprehensive information on their
charges.
At the moment, workplace contract-based defined contribution
schemes, typically personal pension and stakeholder pension schemes
bought from insurance companies, disclose the charge for the scheme
to both employers and employees. Any transaction costs that result
from the trading necessary to invest the scheme are not disclosed.
Workplace defined contribution schemes that are set up under trust
('trust based schemes') do not disclose either the charges or the
transaction costs.
Where disclosure does take place, the way in which this is done
is currently inconsistent which is why developing a consistent
regime is so important so customers can make genuine comparisons
between the charges and costs they are being presented with.
Otto Thoresen, ABI Director General, said:
"While charges for contract-based pensions have reduced
dramatically in recent years, we must ensure that, across all types
of defined contribution pensions, information on charges and costs
is available, clear and meaningful, and helps employees make the
right decisions about their pension.
"Auto-enrolment will have a critical impact on the future
retirement prospects of today's workers. If we are to minimise
opt-outs it will be vital that employees understand what they are
paying and have confidence in the pensions they are being
auto-enrolled into.
"Both parts of the pensions world need to go further to ensure
all workplace savers have the information they need to make the
best choices for their future. For too long, different parts of the
private pensions system, regulated by two different regulators,
have given employees too little information about what they are
paying. Openness and transparency are now expected by
customers, so we all have to do better. I have written to the
Pensions Regulator and FSA to set out what I believe we can achieve
together."
