The pensions emperor is wearing no clothes

John Fox

John Fox

There has been an awful lot in the press recently about the transparency of charges (or rather lack of it) in relation to pension funds.

This is nothing new. In fact, it’s a debate as perennial as the one about bringing back capital punishment, which gets picked up by the media each time an inexplicable crime takes place and we feel something has to be done.

Now I’ve only been in pensions for ten years but this must be at least the hundredth time that even I have been involved in this debate, and then nothing has happened afterwards.

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But this time I think change may finally come about. The question is why here, and why now? I think there are a number of reasons.

For starters, the general public refuse to be hoodwinked anymore. For the first time ever they are not afraid to stand up, as the solemn pensions industry procession passes, and holler that the emperor is wearing no clothes.

Nobody can deny that the pension industry has grown stupendously fat on the way it has charged clients over the years. The effect of charges on some pension funds has been horrific and we have all seen the stories in the press listing the casualties. It has been nothing short of a scandal.

Another reason why I think change is coming is that the IFAs who have survived the RDR are the better ones, and have survived because of their ability to retain customers, profitably, under the new regime. These same IFAs expect similar standards from their product providers and, in particular, from pension providers.

Today’s IFAs want, shock horror, what is best for their clients — and high charging, underperforming and frankly opaque pension plans are not that. This is not something that the pensions industry, with its bottomless entertainment budget, arrogant commission structures and well-heeled sales forces, expected.

The FCA has also done sterling work in targeting the hidden costs and rebates of the pensions world. As a result of its forensic analysis, there have been some headline-grabbing pricing strategy volte-faces from high profile companies, which have served as a serious wake-up call to clients lured by the promise of a low-cost, or free, pension.

Even Steve Webb gets a pat on the back for the work he has done in this area. Despite his recent u-turn on a charge cap, I think we are seeing the result of having some grown-up (and indeed joined-up) thinking within the DWP as a result of having a pension minister that isn’t changed at each cabinet reshuffle.

The result of all these developments is that clients are crying foul, pointing out the stupidity of the naked man stood before them and demanding transparency for their pension costs and accountability from their pension providers. Fingers crossed that’s what we’ll get.