Defined contribution pension providers have made "good progress" on fee reductions after a market study found a large number of schemes were not delivering value for money, the Financial Conduct Authority has revealed.
In 2013, the Office of Fair Trading found that around £30bn of assets under management in both contract and trust-based DC schemes were "at risk of delivering poor value for money" by charging members more than 1 per cent.
As a result, the Association of British Insurers established an Independent Project Board (IPB) to rectify the situation.
The board found that the vast majority of high costs and charges were in contract-based schemes.
Three years on, the FCA and the Department for Work & Pension has found that just over two thirds of the schemes delivering poor value had either brought their fees down to 1 per cent or less, or were on the way to doing so.
However, 16 per cent of the assets under management in contract-based schemes and 15 per cent in trust-based schemes remained subject to "high costs and charges".
Andrew Bailey, chief executive of the FCA, said it was "vital" that pension providers offer good value for money.
He said: "We have seen good progress towards the goals that the IPB laid out but this is not the end of the story. Firms should continue to work to ensure that value for money is being consistently delivered.
“There is still more to do so we will be contacting the providers who have not yet taken satisfactory actions to remedy poor value schemes and we expect them to act swiftly to ensure good value for customers.”
Pensions minister Richard Harrington, meanwhile, said he would "be seeking assurances from the providers of those schemes, that they will be taking steps to resolve this issue”.
Christopher Daems, director of Cervello Financial Planning, said: "We're making significant progress towards a fairer charging structure for people who want to pay into pensions and the fact that two thirds of pensions now provide better value than before is an encouraging move.
"However it does make me wonder about the billions of pounds held still being held in relatively expensive portfolios and what needs to be done to change this."
Yesterday, DWP announced it would be reviewing the 0.75 per cent charge cap on pension schemes providing auto-enrolment, as part of a general review of the auto-enrolment system.
When asked his views on whether the charge cap was at the right level, Mr Daems said:
"The 0.75 per cent cap is as low as it's ever been and whilst I am an advocate of lower charges there does need to be a balance between sustainable, profitable pension providers and total transparency and fairness for consumers when it comes to charges.
"However with the general direction of charges being down it will be interesting to see what happens to cost in the future."