Developing a consistent regime governing the costs and charges associated with workplace pensions is essential to the success of auto-enrolment, according to the Association of British Insurers.

ABI director general Otto Thoresen wrote to the Financial Services Authority and The Pensions Regulator yesterday calling on them to work with the industry to develop a system giving savers 'full confidence that they are being treated in a way that is transparent and fair'.
'The importance of auto-enrolment cannot be over-stated and as millions of employees begin to save for their retirement for the first time it is essential that we gain their trust so they can benefit,' he wrote.
At present, there are significant differences in the way information on charges is handled, Thoresen explained. Contract-based pension disclose all appropriate charges at the outset while trust-based pensions have no employee disclosure regime when an employee joins. Neither type of scheme necessarily discloses charges consistently on an ongoing basis.
Thoresen also noted that the costs incurred by pension schemes in the course of their investment trading - transaction costs - are not disclosed. These costs, which are mainly payments to third parties and tax payments to the Treasury, are different to pension scheme charges but should still be disclosed to employees.
'One of TPR's six "enablers to good member outcomes" is "value for money" and we need to ensure employees can weigh up the charges and costs against the performance potential of the funds when deciding where to invest,' Thoresen wrote.
He cited the example of actively managed investment funds that might incur more transaction costs than passive funds based on tracking an index but could also offer more potential for reduced volatility or take into account ethical or religious considerations.
To develop a consistent regime, the ABI advocates the 'consistent and simple' disclosure of charges to employees across contract and trust-based schemes.
At the same time, transaction costs should be made available to employees in all contract and trust-based schemes. 'The principles behind the Investment Management Association's principles on enhanced disclosure seem a very good way to achieve this,' Thoresen wrote.
Savers should also receive regular communication on charges and transaction costs as their funds build up, and existing workplace pension schemes were urged to provide employees with 'clear and comprehensive' information on their charges.
Thoresen called for work on the new regime to begin 'without delay', with the aim of reaching agreement on a new draft disclosure protocol by the end of the year.