The Work and Pensions committee is today publishing the
Government and the FCA’s responses to its major report
on Pension
costs and transparency . The report in August of
this year warned that Government
is “complacent” about cost transparency failings in the pensions
industry, saying it remained “unconvinced” on the
industry being left to self-regulate. It said that pensions
funds should be obliged to disclose costs to fund
managers in a uniform template, and called on
Government review the level and scope of the pension
product charge cap, as well as
permitted charging structures.
The Government has, in a welcome move, accepted both these
recommendations, saying it “accepts the WPSC’s analysis of the
effect of flat fee charging structures on small pots, especially
dormant pots, and as part of the review will give
particular consideration to
whether restrictions to the
use of this charge structure
in some circumstances is necessary to protect pension
scheme members”
However, in response to a series of recommendations aimed
at making information about consumers’ own pension pots and
pension products more transparent and readily available, the
Government appears inexplicably resistant, including on the issue
of including state pension contributions in the upcoming pensions
dashboard.
The Committee has long argued that one strong answer to two
of the deepest problems currently facing retirement planning in
the UK – low levels of saving and engagement; and the failures of
regulation that leave pension pots exposed to scammers or opaque,
punitive charging structures – is simply better provision of
information.
Whether that is making it mandatory that the full extent
eventual charges, fees, exit penalties of a pension product are
signed up to on the face of the product contract, or making all
of the information about a person’s public and private pension
contributions and schemes available in one place – a single,
national, public pensions dashboard – the Committee regards scope
for improving national retirement outcomes simply by empowerment
through information to be enormous.
This makes the Government’s rejection of the core
recommendation that “by the
end of 2019 the Government
publish a timetable for the rollout of a non-commercial pensions
dashboard”: a Government-led, all-in-one-place pension “account”,
that individuals can use to check and forecast their retirement
savings and planning, and genuinely compare pensions products,
extremely disappointing. The State Pension is a
vital part of many people’s retirement plans. The Government is
mandating that the industry has pensions data ready for the
launch of the pensions dashboards, but does not commit to
preparing its own data in time – even though personal State
Pension projections are already available through Gov.uk.
Rt Hon MP, Chair of the Committee,
said: “Why does the Government insist on
missing a trick like this? We clearly need a central, national,
pensions ‘account’, that every individual could access not only
to monitor directly how their own retirement savings and planning
is shaping up, but also genuinely compare all the vying “offers”
to manage their savings. This requires that the dashboard has
details of the size of the state retirement pensions.”
The Financial Conduct Authority’s response, in turn,
declined the Committee’s call again to cap charges at 0.75% on
its new default investment pathways, but left open the option if
charges are not below 0.75% when the policy is reviewed after a
year of operation.
The Committee’s Report argued that “The FCA would send a
simpler message to the industry if it just set a charge cap now
for investment pathways, rather than issuing vague threats to the
industry.”