A written statement from pensions minister Steve Webb says providers will be required to publish more information to enable those running defined contribution schemes to see exactly how much they are paying for asset management services.
The reform forms the latest part of the government’s drive to bring greater fairness and transparency to pension costs.
The statement also reiterates the Government’s aim to bring in a charge cap in the life of this parliament. The Government says it will publish its response to the consultation on charges, along with proposals on quality and transparency in workplace pension schemes soon. This will contain further details about the implementation and timing of the measures announced today.
Webb said: “We’re taking action to ensure consumers have access to good quality pension schemes so they have the confidence to plan for their futures.
“A lack of transparency around the true costs of trading can prevent schemes from securing value for money for their members. We will outline further details on our proposals shortly.”
Labour pension shadow Gregg McClymont says: ”We don’t know what will be disclosed yet, but the direction of travel is the right one. We will be on the government’s tail when it comes to the detail.”
SCM Private founder Gina Miller, of the True and Fair Campaign says: “The writing is finally on the wall for rip-off pension and investment costs and fees. However it is staggering that it takes Government action to make the pensions industry disclose these costs to pension savers.
“The EU last week announced changes to the MiFID II directive requiring all investment fund costs to be reported in one number; the OFT has issued a report identifying hidden costs and fees in the pensions industry; and the Government has now stepped in and said it will be announcing measures to force the disclosure of hidden charges. Despite this, the financial services industry continues to fail to act to end this rip-off.
“The ABI has responded to news of Government action on pension charges by saying it welcomes the idea of increased transparency on charges – if that is true then why not act now rather than wait for legislation? When we launched The True and Fair Campaign back in January 2012 we estimated as much as £18.5 billion was being hidden in just transaction costs. We have been calling for the end to all this pickpocketing but all the industry has done is issued empty words, worthless codes and consultations.
“We do not need any more excuses and delays from self-serving industry bodies; we need action to safeguard the interests and basic rights of pension savers. We need transparency and governance that will rebuild trust and encourage people to save.
“This Government announcement is welcome but we look forward to seeing the details.”
The ministerial statement in full
I am pleased to announce the Government will be introducing new measures to require transparency for transaction charges in pension schemes. Later today we intend to table an amendment to the Pensions Bill 2013 to introduce this latest step in the Government’s wider plans to ensure consumers receive value for money from their pension savings.
Transparency of costs and charges is fundamental for good scheme governance and to enabling comparison between schemes. Our amendment, which is intended for debate at the Report Stage of the Pensions Bill 2013 in the House of Lords this Wednesday, will place a duty on the Secretary of State to make regulations requiring greater transparency around the transaction costs incurred by work-based defined contribution schemes.
Requiring increased transparency is the latest step in the wider Government programme to see fair charges for people who are automatically enrolled into workplace pensions. Last year, we consulted on whether to cap charges in the default funds of schemes used for automatic enrolment, and the Government remains committed to seeing this policy through during the life of this Parliament. Accordingly, our response to the consultation on charges, and further proposals on quality and transparency in workplace pension schemes, will be published soon.