MPs call for simple and transparent pensions
Fees for the government’s workplace pension scheme must come down and more providers need to enter the market to stimulate competition, politicians have said
Harriett Baldwin, conservative MP for West Worcestershire and a former pension fund manager, said the government-backed National Employment Savings Trust was simple and transparent, but the fee structure was still “on the high side” and she wanted to see “competition from other providers to bring those fees down”.
Speaking at a retirement panel debate in the House of Commons, hosted by LV=, Ms Baldwin said pension funds across the board should be more transparent, “low cost, generic and simple”.
She added: “Pensions have got to be made extremely simple. Nest is straightforward and the website does simplify the message and maths around saving, and that is what people need. That is the most important thing we as policymakers can strive to achieve.”
Asked whether auto-enrolment should be compulsory for employees, Ms Baldwin said: “Re-enrolling people every three years will gradually wear down resistance.”
Speaking at the debate, Gregg McClymont MP, shadow minister for work and pensions, said competition from defined contribution pension providers B&CE and NOW: Pensions, which have launched large, low-cost workplace pensions to rival Nest, could lead to “really good” products and drive costs down.
However he said the contribution cap and transfer restrictions on Nest now needed to be removed to level the playing field.
He added: “We also need greater transparency in costs and charges across all pensions. Occupational and retail pension fees must come down from the current 1.5 to 2 per cent rates.”
Tom McPhail, head of pensions research for Bristol-based Hargreaves Lansdown, disputed the figures. He said average workplace pension charges were actually closer to the 30 to 80 basis point mark, consistent with Nest’s charges.
He said the priority for the industry and government was one around simplification and transparency.
Rather than bombarding clients with pages of technical information about their pensions, Mr McPhail suggested simple communication.
He said: “Just putting a cheap investment out there does not solve the problem. We give clients all this information the FSA says we must tell them, but which they don’t understand.
“There is no joined-up thinking between the Treasury, department for work and pensions and the FSA, and none of these bodies have a remit to get people to save more. They are only tasked with making sure outcomes and products are good.
“Actually encouraging people to save needs to be Treasury-led and supported by the FSA, DWP and industry.”
Mr McClymont agreed, but said the budget for an auto-enrolment awareness campaign was small and had been cut.
He added: “I see no sign that communication has happened in any fundamental way.”
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