A code of conduct that aims to enable employers to choose the best pension for their staff by encouraging pension providers to clearly disclose the charges and investment costs associated with their schemes has been launched today.
The joint-industry initiative specifies that all charges must be clearly and accurately stated in writing and that employers receive a standard template summarising the pension charges levied and the corresponding services.
It also says that employers must be able to see examples of how different levels of charges and charging structures could affect their employees' pension pots, either through a document or online.
The code has been developed by an industry-wide working group and is endorsed by the National Association of Pension Funds and Association of British Insurers, in association with the Investment Management Association and Society of Pension Consultants.
All these groups will encourage their members and other parties involved in setting up and administering pension schemes for auto-enrolment to follow the practices set out in the code.
Joanne Segars, chief executive of the NAPF, said: 'Auto-enrolment will help get millions of workers saving for their old age, but it will only truly succeed if people join a pension that offers good value for money, and if they then stick with it. Charges are a big concern for many people, and this code will help put a spotlight on the fine print.'
Steve Gay, director of life, savings & protection at the ABI, added: 'The new code will allow employers to make a better choice of pension scheme by providing them with clear and consistent information on charges, costs and services. Pension charges have reduced dramatically in recent years but we need to ensure that information is freely available to employers in a format that is concise and meaningful, and helps them to make the right decisions.'
The code will be come into effect in two stages, beginning in January 2013 when providers and others involved in pension provision are expected to use it as a guide for best practice. The ABI is then scheduled to deliver the web tool through which employers can compare how different charges would affect their employers by April 2013. The remainder of the code will then apply one month after this.
The publication of the code was welcomed by The Pensions Regulator's chief executive Bill Galvin, who said: 'Employers are the key decision-makers in workplace pensions and we welcome proposals that help them to make decisions in the interests of their workers. We hope and expect that the code will be enthusiastically adopted by providers and the industry.'
Labour's shadow pensions minister Gregg McClymont said that while the code was a 'significant step forward', there was still room for improvement, both on costs and transparency and on pensions reform in general.
'There is a long way to go on reform of occupational pensions and we want to see critical developments, including on scale and governance to ensure that people get pensions they can trust.'
