The Association of British Insurers (ABI) has announced an agreement to ensure the consistent and straightforward disclosure of pension charges and costs to employees in workplace pension schemes.
The agreement will be implemented by the summer of 2014 for schemes that arenewly established for auto-enrolment, and for all older workplace pension schemes by 31 December 2015.
A common definition of all charges to be disclosed at the outset to pension scheme members will be developed in the first half of 2013.
The agreement will require:
- The disclosure to employees of total charges at outset, to a standard definition, across contract and trust-based workplace pension schemes, including any entry or exit charges.
- The disclosure of the total charges taken in the previous year. It is intended this will be expressed in pounds, either as the exact amount or as a rounded figure in each case, where reasonably practical.
- The disclosure of the previous year’s investment transaction costs (using the Investment Management Association’s (IMA) guidance).
The agreement has been developed by the ABI and its members in conjunction with a working group consisting of representation from the Financial Services Authority, IMA, National Association of Pension Funds, The Pensions Regulator and the Department for Work and Pensions. A number of consumer and representative bodies have also been consulted.
The ABI will monitor the agreement and provide regular progress reports. This will include information on the number of schemes and proportion of the market where the agreement has been implemented.
Pension providers that have signed up to the agreement include: Aegon, Aviva, Axa, B&CE (The People’s Pension), Co-operative Insurance, Friends Life, Legal and General, Lloyds Banking Group, LV=, MetLife, Prudential, Royal London/Scottish Life, Standard Life and Zurich Assurance.
This initial group is drawn from the ABI’s membership and consultation will continue on extending this to the broader market of pension provision.
Stephen Gay, director of life, savings and protection at the ABI, said: “This agreement is a vital way of providing savers with greater understanding and confidence in the value of saving for their financial needs in later life.
“The agreement demonstrates the industry’s commitment to improving customer understanding in pensions by disclosing all pension charges and costs more clearly and consistently.
“Automatic-enrolment into workplace pensions is bringing millions of people into pension savings for the first time. It is imperative that savers have complete confidence that the industry is open and transparent with them.”
Steve Webb, minister for pensions, added: “This is a welcome step in helping customers make decisions about their long-term saving and I hope to see providers across the industry signing up to this agreement.
“Charges really matter. Small differences can have a big impact on a pension pot over time.
“Automatic-enrolment makes it all the more important that people have access to schemes which offer both transparent and value for money charges. The industry must be ambitious in its timescales for achieving greater transparency.”