ABI calls for transparency over pension charges

| August 23, 2012
ABI calls for transparency over pension charges

A ‘protocol’ should be given to members of company and private pension schemes, giving clear information on charges, the Association of British Insurers (ABI) says.

The ABI’s call for pension charges to be made clearer comes prior to the introduction of automatic enrolment in autumn, when employers will be required to enrol workers in a company pension scheme unless they chose to opt out.

Otto Thoresen, director general of the ABI, said: “We must ensure that information on charges and costs is available, clear and meaningful, and helps employees make the right decisions about their pension.

“For too long, different parts of the private pensions system, regulated by two different regulators, have given employees too little information about what they are paying.”

The Labour Party and organisations such as the Royal Society of Arts (RSA) have recently criticised pension providers for high chargers and unclear information about charges.

Costs incurred by pension schemes for share trading are not currently disclosed and can have a significant effect on returns in the long-term.

The ABI wants the costs of share trading to be included in its proposed protocol.

It has written to both the Pensions Regulator and the Financial Services Authority suggesting that the new protocol should be introduced by the end of the year.

The move has been supported by the Pensions Regulator, which suggested last year that the pension industry should improve the transparency and comparability of pension charges.

Greater transparency is expected to lead to increased confidence in pensions and a fewer employees choosing to opt-out of workplace schemes.

Meanwhile the government is working to simplify state pensions and has revealed huge variations in state pension incomes.

Around 130,000 people receive a state pension of just £7 a week, while others get £230, according to new figures from the Department for Work & Pensions.

The Government has confirmed plans for a flat-rate universal state pension which should eliminate this disparity, which it says is caused by a variation in basic and additional state pension top-ups in the current system.

The pensions minister Steve Webb said: ‘The current system is so complex and would baffle even Einstein.’

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