The governments plans to introduce caps on pensions management charges are unlikely to be workable and will miss a golden opportunity for reform, experts have warned today.
A panel debate on impact of the Pensions Act, which will also introduce a new 'pot follows member' initiative, raised concerns that the reforms would add to regulatory burden on the industry without having the desired effect.
The annual management charges cap and pot follows member system both form part of the Act's framework, which received Royal Assent in May.
At the debate organised by the Westminster Employment Forum, Gina Miller the founder of The True and Fair Campaign that has campaigned for transparency in investment charges, warned the charges cap 'was not going to work', as it only applied to defined contribution schemes and didn't include all fees.
Trustees 'had very little understanding' of the proposals, she warned. 'I've come across a number of trustees and the majority don't even know what a TER (total expense ratio) - a fee that is deducted from members' pot to pay for services - much less what will be in a cap.
'In fact they have very little understanding of fees in pension schemes. They don't understand that statistically additional active management is going to lose them money.'
She called for transparency in the industry to be increased through the use of what she called 'ticket prices' for all costs.
'This legislation is going to miss the golden opportunity,' she told delegates.
Michael Johnson, research fellow at the Centre for Policy Studies, also criticised the plans, warning that the cap would be irrelevant because pension fund trustees themselves were not aware of many charges.
'[Pensions minister] Steve Webb had lost the plot twice in the last year, the first is to do with pot follows member system and the second annual management charges,' he said.
He added that the pot follows members reforms were not what customers wanted, as a majority supported aggregation of different pension pots instead.