Workplace pension charges to go online in transparency push - Lower My Charges

Workplace pension charges to go online in transparency push

Workplace pension charges to go online in transparency push

620 388 Ian Brewer

A lot of news of late has been the focus on how there an agenda when it comes to pension charges and how they are applied and what the consequences could be by having less in your pension pot due to high excessive charges.

It would seem now that the Government is starting to apply pressure that the employer should take some of this responsibility when choosing to set up a Pension scheme for its employees.

We found this article we wish to share with you that sheds more light on the subject and what the Government plans to do if employers don’t comply.

The Article

OCTOBER 26, 2017 by Josephine Cumbo, Pensions Correspondent FT

Managers and trustees of schemes will face fines of up to £50,000 if Managers and trustees of Pension schemes are not checked if they offer the best value for money when it comes to charges.

Millions of workplace pension savers will soon be able to compare pension charges online as a result of government proposals to be announced on Thursday. More than 5m workers are currently saving into retirement plans arranged by their employers.

But those employees do not have readily available information about their pension charges, or where their money is being invested. However, under the new government proposals, managers and trustees of thousands of workplace pension schemes will be required to publish comprehensive information about their charges.

Those that do not comply will face fines of up to £50,000. “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,” said David Gauke, secretary of state for work and pensions. “I want people to have a strong sense of personal ownership over their pension savings. These proposals do just that and will open the industry.” Mr Gauke said that all pension charges, “including those popularly viewed as hidden”, would need to be published.

The measures, which are outlined in a 48-page consultation document, would see the first batch of information relating to costs and charges published online in 2019. The government now needs to reduce the auto-enrolment charge cap to 0.5 per cent, from 0.75 per cent, at most to ensure that consumers aren’t losing out on future retirement income Which? The new disclosure requirements would initially only apply to about 2,500 larger “trust-based” defined contribution schemes, overseen by the Pension Regulator.

But the government said that it may consider extending the disclosure requirement to “defined benefit” plans. The new measures would compel trustees not only to publish a percentage figure for fees levied on pension savings, but also provide a “pounds and pence” illustration so members can see how charges hit their growing retirement pot.

“This is a very good initiative,” said Ros Altmann, a former pensions minister. “Anything we can do to encourage transparency of pension charges should be encouraged.” Which?, the consumer group, 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 when it is rolled out. “The government now needs to reduce the auto-enrolment charge cap to 0.5 per cent, from 0.75 per cent, at most to ensure that consumers aren’t losing out on future retirement income.” The numbers of workers automatically enrolled into workplace pensions is expected to swell to more than 10m by next year.

Recommended The Big Read: The great British pensions cash-in FCA urged to launch full probe into pension transfer advice MPs to probe growth in final salary pension cash-ins Because workplace pension schemes are arranged by employers, pension trustees and managers have been subject to minimal requirements to disclose fund fees ultimately borne by savers, or explain where their money is invested.

The new measures will force trustees to go further and set out the costs and charges for each fund offered in a workplace plan, not just the main “default” fund that most workers are placed into if they do not make an active investment choice.

Workplace pension members cannot currently switch to a new provider if they are unhappy with their workplace scheme unless they are willing to risk losing their employer’s pension contribution.

But Mr Gauke said the enhanced disclosure requirements would “make the industry better and more competitive”. The proposals come at the same time as the government and regulators are making broader efforts to compel asset managers to disclose transaction charges in a standardised way.

From next January, fund managers will be required to disclose transaction costs to pension schemes. The Financial Conduct Authority is also expected to consult next year on measures to achieve similar transparency outcomes for millions of members of “contract-based” pension plans.

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