Pension schemes will be required to publish the fees they charge their members for investing their pension, secretary of state for work and pensions David Gauke has said today.
The DWP says occupational workplace pension scheme trustees, responsible for the pensions of around 10 million people, could be fined up to £50,000 from April 2018 if they fail to publish their fees.
Government-commissioned research on transparency on costs in pension schemes has led to a proposal that members receive an annual benefit statement where they can find the costs and charges for their scheme.
The DWP says publication of charge and transaction cost information will enable pension scheme trustees and others to compare the value for money they are receiving with their peers, thereby driving better market outcomes. It has announced a consultation on how charges should be disclosed that will run for 6 weeks. The Financial Conduct Authority (FCA) will consult on corresponding rules for workplace personal pensions it oversees in the new year.
The Government says it will also compel schemes to publish an illustration of the compounding effect of the costs and charges affecting their pension savings.
Gauke says: “The government is beginning to address a fundamental imbalance that exists in the pensions industry.
“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.
“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.
“By giving people the tools to better understand their options and compare value for money, I believe we are creating a generation of smarter, more informed savers.”
Aegon pensions director Steven Cameron says: “It’s important that all charges associated with pensions of all types are publicly available. We now have regulation around how to calculate fund level transaction costs, allowing this last remaining gap to be filled. As the DWP and FCA recognises, cost and charges information is particularly important and relevant to decision-makers such as trustees and IGCs. While some members may also take an interest, it would be counter-productive to engagement to force feed every member extensive, detailed and often complex facts and figures. The DWP is striking the right balance by proposing trustees should ensure members who do want to engage with this information know where to get it. Such information needs to be presented with a clear explanation so that people understand how to use this to make the right decisions.”