The Association of British Insurers (ABI) has set out an action plan for clearer pension charges and costs in a letter to The Pensions Regulator and the Financial Conduit Unit of the Financial Services Authority (FSA).
Its plan is designed to improve transparency across the whole of the pensions industry and raise confidence ahead of the introduction of auto-enrolment, which comes into effect for the largest UK employers from October 2012.
The letter sets out clear priorities for action towards developing an industry protocol by the end of the year that will ensure:
- A consistent and simple disclosure of charges to employees across contract- and trust-based pension schemes.
- Transaction costs, such as broking fees, are made available to employees in all contract- and trust-based schemes.
- All employees receive regular, clear and meaningful information on charges and transaction costs as their funds build up.
- Existing workplace pension schemes ensure that employees are provided with clear and comprehensive information on their charges.
Otto Thoresen, director general at the ABI, said: “While charges for contract-based pensions have reduced dramatically in recent years, we must ensure that, across all types of defined contribution (DC) pension schemes, information on charges and costs is available, clear and meaningful, and helps employees make the right decisions about their pension.
“Auto-enrolment will have a critical impact on the future retirement prospects of today’s workers. If we are to minimise opt-outs, it will be vital that employees understand what they are paying and have confidence in the pensions they are being auto-enrolled into.
“Both parts of the pensions world need to go further to ensure all workplace savers have the information they need to make the best choices for their future. 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.
“Openness and transparency are now expected by customers, so we all have to do better. I have written to The Pensions Regulator and FSA to set out what I believe we can achieve together.”
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