More clarity please over ‘reasonable’ pension costs
Pension charges are, on the whole, reasonable and fair but the industry must introduce greater clarity over charges, Ian Naismith has claimed.
Responding to the recent outcry over unfair pension charges and pension minister Steve Webb’s assertion that the government could intervene to cap charges, Mr Naismith, head of pensions market development at Scottish Widows, said the onus was now on the pensions industry to improve clarity on charges and demonstrate that customers were getting value for money.
Mr Naismith said that pension charging was once “fundamentally simple”, but also more expensive than we could expect today - reflecting higher commission payments, lower levels of automation and fewer economies of scale.
He added: “Steve Webb’s recent challenge however, does highlight that older charges may be onerous for those who only contributed for a short time but still have policies in force, and we need to look at that carefully.
“Consumers will struggle to understand why charges increase substantially each year when they receive no extra services, and when the reason is explained they may feel aggrieved about subsidising less consistent savers.
“Charges are emotive, and make for easy political sound-bites. Providers now need to greatly improve clarity on what we charge and why, and to examine our cupboards for possible skeletons.”
Graeme Mitchell, managing director of Scottish Borders-based Lowland Financial, said: “We need a fundamental review into pensions which is not subject to the type of short-term political expediency we saw recently about pension charges.
“I’ve been advising on pensions for more than 30 years and I think charges are lower and much more transparent, but there is still more to do to make it more attractive to save.”