RegulationSep 5 2014

Small pot strategy criticised by pensions experts

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Pension experts rounded on the Department for Work and Pensions’ policy to create a ‘pot follow member’ approach to the problem of multiple small pension pots, along with criticism of the 0.75 per cent charge cap on defined contribution schemes.

Speaking yesterday (4 September) at the Westminster Employment Forum, Helen Forrest, head of policy and advocacy for the National Association of Pension Funds, called for a “serious rethink” of the government’s approach, which raised “stark inconsistencies”.

She suggested that auto-enrolment was pushing towards the aggregation option and that was why more people were now choosing multi-employer master trust schemes.

Jane Vass, head of public policy at Age UK, said that the small pots issue has not gone away and the government needs to have a bigger overall look at it.

Michael Johnson, research fellow at the Centre for Policy Studies, stated he was generally a fan of pensions minister Steve Webb’s reign but “he has lost the plot with pot follows member” and questioned the £10,000 cap it had applied.

Mr Johnson, argued that “pensions are finished” and “regulation does demonstrably not work”, criticising the multiple regulators and their top down enforcement that has kept the industry as one of the least trusted.

The issue of costs and charges was also at the top of the agenda, with Gina Miller, founding partner at SCM Private and founder of the True and Fair Campaign, calling the current state of pensions “an incredible scandal”. She believed that the 0.75 per cent cap on defined contribution scheme charges would not work “as it only applies to DC and does not include all costs”.

Ms Miller said: “Caps don’t work, we need transparency with all costs in pounds, pence and percentages so people can make informed decisions. The time for consultation is over, we need action, regulators are fiddling while the consumer burns.”

Teresa Fritz, an independent consumer finance consultant and member of the Financial Services Consumer Panel, agreed that annual management charges and total expense ratios do not tell the whole cost, with both scheme trustees and consumers struggling to understand what they are being charged.

Stephen Soper, the Pensions Regulator’s interim chief executive, had previously declined to comment any further on the recently-raised issue of a single regulator for pensions, but did concede that there is a “big challenge” in this area and it has been difficult for trustees to establish all the investment costs incurred.

Mr Soper said TPR had a hectic timetable over the next 12 months and that it was challenging to predict what new products would appear as a result of the Budget reforms.

He added that his team was working the HM Revenue and Customs to remedy the lack of occupational scheme register which left consumers vulnerable, as opposed to the Financial Conduct Authority’s register of personal pension providers.