The Transparency Task Force has written an open letter to the chairman of the Work and Pensions select committee calling for an inquiry into the impact of pension product costs on savers.
The letter to select committee chairman Frank Field, written by the taskforce's chairman Andy Agathangelou, calls for "better provision of transparent, consistent and straightforward disclosure of all the costs and charges [consumers] pay".
In an accompanying statement, Mr Agathangelou said the "opacity and obfuscation around costs, explicit and implicit, has to be dealt with, for once and for all".
"People need to understand the corrosive impact of costs. For example, if costs are 2 per cent per annum and gross market returns 5 per cent per annum, a 20-year-old saving £100 per month until 65 will lose 42.55 per cent of his/her pension fund to costs," he said.
"Whilst hoping that many arrangements will cost less it’s possible some might be costing even more. Of course, ‘cheapest doesn’t always mean best’ but we really must get the market working much more efficiently and much more transparently than it does now."
Mr Agathangelou said the committee was the best body to lead this inquiry because "they operate in a tenacious, non-partisan consumer-centric and forensic way".
He said the inquiry should seek to address 10 specific problems and risks, including: confusing products; risk of litigation; failure of market forces leading to pro-consumer outcomes; the risk that the government's pension policy is jeopardized; ineffectual governance of pension schemes; and negative publicity and distrust of pensions.
The letter concluded: "For reasons of social justice, market efficiency, good governance, national reputation and to help protect the ongoing success of the government’s pensions policy, we would like your committee to open an inquiry into the matters set out in this open letter."
Mr Agathangelou said the taskforce would seek additional signatories to the open letter before it was delivered to Mr Field.
The taskforce named 14 signatories, including Association of Consulting Actuaries chairman Bob Scott, Pensions Playpen founder Henry Tapper, and Retirement Income Alliance chairman Malcolm Small.
Alan Chan, a chartered financial planner and director of IFS Wealth & Pensions, welcomed the proposal, saying more transparency was "always a good thing".
"Sometimes it's hard even for an adviser to find the details of charges - particularly with older pension schemes," he said.
Specifically, he said he would like to see more work done to create a single, simple charge on pension products.
He said the current system, which sees some funds use three different charges - the investment charge, the ongoing charges figure (OCF) and the total expense ratio - was confusing, and could conceal high total fees.
However, he stressed that the focus must not be on cost "at the expense of everything else".
james.fernyhough@ft.com
