Cautious welcome for ‘first step’ charges code of conduct

A new joint industry code of conduct for disclosure of pension charges has been given a cautious welcome, but Labour and the TUC say more needs to be done to restore faith in pensions.

A new joint industry code of conduct for disclosure of pension charges has been given a cautious welcome, but Labour and the TUC say more needs to be done to restore faith in pensions.

The code of conduct, which sets out the information that should be made available to employers on the charges made on workplace pensions, was launched by the NAPF, ABI, IMA and SPC amongst other organisations.

The code calls for the consistent disclosure of charges and investment costs across the workplace pensions landscape.

The code specifies that all charges are clearly and accurately stated in writing, and that employers receive a standard template summarising the pension charges levied and the corresponding services. It also says that employers must be able to see examples of how different levels of charges and charging structures could affect the pension pots of their employees, either through a document or a dedicated web tool.

The code has been developed by a working group made up of trade, consumer and industry organisations, and pension providers.

The NAPF, ABI and IMA will encourage their members to adopt the practices set out by the code, but it will not be mandatory.

The code will come into effect in two stages. The first stage begins on 1 January 2013 when the code should be used as a guide for best practice. The second stage starts one month after the launch of the dedicated web tool, which is expected to be available from 1 April 2013 and is being produced by the ABI. During this stage all the provisions of the code will apply.

Gregg McClymont MP, Labour shadow pensions minister says: “The industry have listened to what Ed Miliband and I have been saying on transparency of costs and charges. The revised code represents a significant step forward – albeit with room for further improvement. But there is a long way to go on reform of occupational pensions and we want to see critical developments, including on scale and governance to ensure that people get pensions they can trust.”

TUC general secretary Brendan Barber says: “We believe that the code of conduct is a big step forward but we will have to assess how effective it is at bringing down charges once it is operational. And we still need to see more transparency over wider transaction costs across the pensions industry. It will take more than this code alone to get full transparency, and ensure that staff get the best possible return on their pension savings.”

Joanne Segars, Chief Executive of the NAPF, says: “Employers need to be able to see more clearly what is being charged and why. They will then be more likely to pick the best pension for their staff. The code sets out a template for explaining charges that will make it easier to compare the cost of pension A with pension B.”

Steve Gay, Director of Life, Savings & Protection at the ABI, said: “The new code will allow employers to make a better choice of pension scheme by providing them with clear and consistent information on charges, costs and services. Pension charges have reduced dramatically in recent years but we need to ensure that information is freely available to employers in a format that is concise and meaningful, and helps them to make the right decisions.”

Jonathan Lipkin, Associate Director of Pensions and Research at the IMA, says: “This is the beginning of the road. Much more has to be done to ensure that scheme members themselves feel greater confidence in DC schemes, whether trust-based or contract-based. This means an emphasis on overall governance as much as disclosure. We look forward to working with regulators and other stakeholders in taking this forward.”