Workplace pension providers to publish fees for first time
As part of the proposals announced by the Department for Work and Pensions (DWP), savers will be able to access information about where their money is invested. This in turn should lead to consumers having more choice over where their pension is invested and it will also allow them to compare the value for money they receive.
The government will also push for schemes to publish an illustration of the compounding effect of the costs and charges affecting workers’ pension savings.
The DWP estimates the move could benefit up to 10 million people and any scheme trustee failing to provide the information could be fined up to £50,000 from April 2018 if they fail to provide the information.
The government said this is the next step it is taking to ensure savers receive good value for money from their pension, that it meets their needs in retirement and that they can maximise their savings.
Secretary of State for Work and Pensions, David Gauke, said: “The government is beginning to address a fundamental imbalance that exists in the pensions industry.
“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.
“By giving people the tools to better understand their options and compare value for money, I believe we are creating a generation of smarter, more informed savers.”
Today’s announcement comes on the back of the latest pension charges survey which showed that 98% of eligible members are being charged 0.75% or less – this is the cap introduced by the government.
However the survey also highlighted a clear lack of transparency on some costs in pension schemes and an annual benefit statement where people can find the costs and charges for their scheme will help address the issue.
Steve Webb, director of policy at Royal London, said: “For an investment of 80p after tax relief, a worker can get two pounds in a pension, and less than two pence of this will pay for the cost of running the scheme. This is incredible value for money and explodes the myth that anyone in a pension is at risk of ‘rip-off’ pension charges.”
He added that well run schemes should have nothing to fear from greater transparency on costs and charges. “Trustees and governance committees will welcome additional information which will help them to ensure that their members’ money is invested in a way which delivers maximum value-for-money.”
Darren Philp, director of policy at The People’s Pension, added: “While the announcement is welcome, the government should go a step further and include transaction costs under the charge cap for auto-enrolment schemes, where trustees would have to explain if the cap were breached due to transaction costs.”