Workplace pension savers will be able to compare pension charges online from April 2018, as the disclosure of this information from managers and trustees is to be made mandatory.
The Department of Work and Pensions (DWP) has published today (26 October) draft legislation and a consultation paper on the issue.
Under the new proposals, managers and trustees of thousands of workplace schemes will have to publish comprehensive information about their charges, or face a fine up to £50,000.
The new disclosure requirements will be applied to occupational schemes that provide money purchase benefits. However, the new rules might be extended to defined benefit (DB) plans in the future.
Trustees of the schemes will not only publish a percentage figure for fees levied on pension savings, but also provide a “pounds and pence” illustration so members can see how charges hit their growing retirement pot.
According to David Gauke, secretary of state for work and pensions, the government is “beginning to address a fundamental imbalance that exists in the pensions industry”.
He said: “For too long savers have been in the dark about where their pension is invested, what they are paying for, and why they are paying it.
“I want people to have a strong sense of personal ownership over their pension savings. These proposals do just that and will open the industry.”
Michelle Cracknell, chief executive of The Pensions Advisory Service, said that “making informed decisions relies on having the right information”.
She said: “The announcement by DWP on disclosure of pension charges and investments is another piece of the jigsaw that readily provides the information that empowers members to make decisions that will create better outcomes.
“Huge strides have been made over the last few years to improve the quality of pension schemes, which is essential to build the trust that members have in their pensions.”
Darren Philp, director of policy at workplace scheme The People’s Pension, also argued the new rules are “welcomed news”.
He said: “At The People’s Pension, we truly believe in transparency and we have published full details of our transaction costs for public scrutiny.
“Only with such action can we be sure that transaction costs are proportionate and do not disproportionately affect pension savers’ investments.”
According to figures published last month, more than 8.5m more people have been saving into a workplace pension scheme due to auto-enrolment, which was launched by the government in 2012.
These new rules follow new requirements from the Financial Conduct Authority published last month, which state that asset managers will have to disclose total transaction costs to pension schemes that directly or indirectly invest in their funds.
These firms will also have to provide information about administration charges, and a breakdown of the transaction costs, on request, with the total broken down into clear categories of costs.
The DWP will also consult on regulating how asset managers’ costs and charges, as they affect pensions, should be published for transparency purposes.