A bill calling for greater transparency and charge caps on all defined contribution schemes is one step closer to becoming law following a successful 10 minute motion brought last week.
The Pension Charges Bill 2017/19, which was introduced by Angela Eagle, Labour MP for Wallasey and former minister of state of the Department for Work and Pensions, on May 8 has been granted a second reading in the House of Commons.
Ms Eagle proposed the introduction of a mandatory cost disclosure framework for pension products which would become part of the annual statements sent to defined contribution members.
In addition, the bill seeks to extend the current 0.75 per cent cap on charges in auto-enrolment schemes to all DC pension savings, and to also introduce a cap on charges in decumulation.
In April 2015 a 0.75 per cent charges cap was introduced which covered default investments in auto-enrolment qualifying schemes.
This charge cap was reviewed in 2017, with the government deciding to put off any change to the level or scope of the cap until 2020 by which time it expects to see a clearer case for change.
Ms Eagle said the aim of the bill was to drive down the cost of pension fund management, achieve better value for money, and ensure that a higher proportion of pension pots will go towards helping savers to achieve a comfortable retirement.
David Everett, partner at pensions consultancy Lane Clark & Peacock, said: "The 0.75 per cent charge cap is well-established but applies only at the accumulation stage to the default arrangements of most DC schemes used as qualifying schemes for auto-enrolment purposes.
"We have yet to see the detail of what Angela Eagle is proposing, but as of right now it would seem that this bill is purely a mechanism under which she and her Labour colleagues can advance arguments that more needs to be done in this area.
"With little chance of her bill becoming law, it will be how these arguments play out in parliament and beyond that will be of interest to watch, as some of what she is proposing may well become law in time, but through other means."
Ms Eagle has pointed out that the introduction of pension cost transparency in the Netherlands led to a 31 per cent fall in the cost of managing pensions per scheme, according to research from KAS Bank in 2018.
The date for the second reading of the bill has not been set.
Fiona Tait, technical director at Intelligent Pensions, said: "It is absolutely right that customers should be able to understand what they are paying for a service however, it must be recognised that there are many parties involved in the manufacture, distribution and running of a pension plan and care must be taken that the rules are enforced in each area.
"I fully support the concept of greater comparability of pensions and acknowledge that the current rules around illustrations make this hard to do.