The Work and Pensions Committee has launched an inquiry into whether the pensions industry provides sufficient transparency around charges, investment strategy and performance to consumers.
The increasing focus on pensions follows the rapid rise of auto-enrolment – creating millions of new savers – and the introduction of pension freedoms, which have given people more flexibility with their savings.
However, these developments have also led to concerns about the effect of investment management charges, transaction, advisory and other intermediation costs, in eroding the value of individuals’ savings. As well as worries around low engagement and understanding, coupled with costly and opaque intermediation, which could lead to poor outcomes.
Provisions have been put in place to protect workplace pension savers. These include subjecting default auto-enrolment defined contribution plans to a 0.75% charge cap. As well as introducing regulations to improve cost and investment disclosure within the accumulation phase to help auto-enrolled savers understand and compare schemes’ value for money and the long-term effect of charges on savings.
In addition, since April 2015, FCA-regulated workplace pension schemes must appoint an Independent Governance Committee (IGC) to scrutinise value for money on behalf of scheme members and make representations to the provider or FCA as appropriate.
Despite these provisions, the Committee is still keen to ensure that the pensions industry is being as transparent as possible. As such, it is specifically investigating whether enough is being done to ensure individuals:
get value for money for their pension savings; understand what they are being charged and why; understand the short- and long-term impact of costs on retirement outcomes; can see how their money is being invested and how their investments are performing; are engaged enough to use information about costs and investments to make informed choices about their pension savings; and get good-value, impartial service from financial advisers.Employers and employees can submit their views on this issue by sending the Committee a written submission via the online form – the deadline is 3 September 2018.
