Miliband slammed over pension charge comments
Comments by Labour leader Ed Miliband about the prevalence of high pension charges have been branded “misinformed” by Otto Thoresen.
Speaking in Westminster on Thursday, Mr Miliband said excessive charges from pension providers was a “massive, massive issue that is coming down the tracks”. The party is expected to publish a paper on Monday outlining their plans for pension reform amid concerns that some providers are charging fees of up to 5 per cent.
But Mr Thoresen, director general of the Association of British Insurers said: “It is absolutely wrong for Ed Miliband to imply that a 4 per cent or 5 per cent pension charge is normal. Pension charges have been falling steadily for the last decade and are continuing to fall.”
He added that new auto-enrolment schemes had an annual management charge 0.52 per cent, with average charges for existing schemes at 0.77 per cent, while many other schemes had charges as low as 0.3 per cent.
He said: “Nobody in the pension industry would defend a charge of 5 per cent for a standard new pension and we would ask Ed Miliband to write to us with details of the schemes that he is referring to.
“The pensions industry is absolutely committed to ensuring that charges are as low as possible and that customers understand what they are paying. This is a critical time for pension saving in this country, scaremongering about charges runs the risk of putting off many people from saving into a pension, which is critical for their financial future.”
Joanne Segars, chief executive of the National Association of Pension Funds, said: “Charges can have a big impact on the final size of a pension pot, and people need to be very wary of high rates. Auto-enrolment is just around the corner and will bring millions into their own workplace pension for the first time. We can’t afford to let fears or uncertainty about charges put them off.
“We want to see much more clarity about what charges are made on a pension, and why. We are working with employer groups and pension industry leaders to develop a code of practice around this issue”.
Helen Dean, managing director of scheme development at Nest, said: “Everyone deserves a pension that is low cost and value for money. Nest offers the same low charge to all members, equivalent to 0.5 per cent for most savers and falling to just 0.3 per cent at times when members take a break from contributing.”
Tom McPhail, head of pensions research at Hargreaves Lansdown, said Mr Miliband was wrong to focus on the level of charges, especially as he was talking about pensions which were now out of date.
He added: “The vast majority of millions of people being auto-enrolled into pensions in the coming years will be going into schemes with annual charges of less than 1 per cent. The risk of grandstanding on ‘rip-off’ pensions is that people will be deterred from saving for retirement.”
Other commentators were more sympathetic to Mr Miliband’s claims about charges.
Dominic Johnson, chief executive of Somerset Capital Management, said: “We believe charges across the investment industry have been too high for too long, and eat into investors’ returns. We have made a commitment to cap the expenses on our funds to protect investor returns.”