Commenting on the news that the government has tabled an amendment to the Pensions Bill to require pension providers to disclose all transaction costs in defined contribution workplace pensions, Malcolm McLean, says:
“It is perhaps not surprising that the government has now decided to act more explicitly on the vexed question of pension charges and has today tabled an amendment to the Pensions Bill to require pension providers to disclose all transaction costs in defined contribution workplace pensions.
“This follows criticism from Labour and comes on the back of research published by the DWP on research on charges and quality in defined contribution pension schemes. The report showed the average Annual Management Charge (AMC) for trust-based schemes was 0.75 per cent of the fund per year. Among contract based schemes the average AMC was 0.84 per cent – rather higher than figures from the Association of British Insurers had suggested.
“Labour lords also last week tabled an amendment which would force introduction of a charge cap by May 2015.
“It is difficult to argue in principle at least against these proposals.
“For too long the whole question of fees and charges creating poor value for money from pension saving has been a festering sore which sooner or later had to be addressed.
“Full transparency and comparability of all charges is an essential first step in the process of letting savers know what they are getting into and restoring confidence in the pensions system which is becoming increasingly tarnished as a result.
“Thereafter the question of a cap, at what level and when to introduce it needs to be determined.
“To remove the present uncertainty it would be in the best interests of all concerned – employees and employers alike - if a decision on the cap could be expedited and made known as soon as possible but with a sensible forward implementation date to avoid disrupting the current on-going auto-enrolment programme which many employers are struggling to bring in and which is now approaching a critical stage.”