ABI says Labour’s pension warning is misleading
A new report by the Labour Party on pensions has been criticised by the Association of British Insurers (ABI) as badly timed and misleading.
The report, by shadow work and pensions secretary Liam Byrne, supports earlier comments by Ed Miliband that pension fees and charges could erode half of a retiree’s pension fund.
The Labour Party is calling for pension charges to be reduced and says that a future Labour government would limit pension fund fees if this doesn’t happen.
It is also calling for greater transparency and simplicity for pension charges and for stricter regulation.
Refuting Labour’s criticisms, the director general of the ABI, Otto Thoresen, said:
“Most private pensions work well for their customers, charge fairly and give clear information about how they work.
“Charges have been falling steadily for the last decade and the average annual management charge is now just 0.77 per cent.
“The extra costs Labour highlights are transaction costs that include stamp duty and relate only to particular types of actively managed funds.”
Labour’s remarks precede the introduction of the national auto-enrolment pension scheme, under which employers will be required to automatically enrol workers into a workplace pension scheme.
Mr Thoresen warned that the comments could undermine confidence in pension saving at this crucial time.
The National Audit Office (NAO) recently warned that the charges levied by some fund managers could be eroding defined contribution pension schemes by up to 17 per cent.
A report by the NAO calls for fund managers to be more accountable for how they manage the schemes, following its study into the regulation of defined contribution (DC) pensions.
It said that a third of members of DC schemes found it impossible to assess whether the charges they were paying were competitive.