Pensions  

OFT threatens pensions crackdown

In an announcement from the OFT, Mary Starks said the body was conducting a market study, to be completed in August, which could result in an inquiry into competitive practices or action under the competition act.

Ms Starks, senior director in the OFT’s services, infrastructure and public markets group, said the investigation was being launched to coincide with the implementation of auto-enrolment, as up to 9m more workers would be in DC schemes by 2018.

She said: “The UK workplace pensions market is set for rapid growth and change over the next six years, in particular with the introduction of automatic enrolment. It is important that these savers get a good deal.”

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The market study will focus on value for money and the size of pension pot that savers end up with at retirement.

Key issues to investigate:

How pension providers compete.

Whether there is sufficient pressure on pension providers to keep charges low, and how transparent they are.

Whether smaller firms face difficulties in making pension decisions in the interest of their employees.

Whether smaller firms receive appropriate help.

Barriers to switching and ongoing employer engagement in setting up and managing pensions.

What next?

If you wish to contribute to the study prior to consultation, please contact pensions@oft.gsi.gov.uk

Industry view

Otto Thoresen, director general of the Association of British Insurers, said: “People need a system that delivers value for money pensions and works well for employees and employers.

“ABI members recognise this and are raising standards to meet customer expectations. Pension charges have fallen to their lowest level, and industry initiatives are set to ensure charges and costs are disclosed clearly in a consistent format, and that people nearing retirement get more help to get the best pension deal.”

“We look forward to working with the OFT to ensure the study is complete and well-informed”

Provider view

Steven Cameron, head of regulatory strategy for Aegon, said: “This investigation is an opportunity to look at various supply and demand aspects of DC pensions in the round.

“The OFT will also examine whether smaller firms receive help and advice. Advisers play a key role and we have concerns regulation is making it harder for them to help such employers. Advisers encourage greater employer engagement, which is particularly pertinent to auto enrolment.”

Adviser view

Tom McPhail, head of pensions research for Bristol-based Hargreaves Lansdown, said: “The quadripartite system of scheme oversight, involving the department for work and pensions, Treasury, FSA and Pensions Regulator is not functioning well and needs to be rethought.

“The OFT’s investigation may provide a catalyst for such a review, which I believe would be a good thing.”

He also warned that the OFT should not focus purely on pricing.