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The Actuary The magazine of the Institute & Faculty of Actuaries

MPs slam pension industry for ‘ripping off’ savers

The UK government should force pension schemes to be more transparent about investment costs and how much they charge savers, MPs have recommended today.

Pension savers "overcharged"  ©iStock
Pension savers "overcharged" ©iStock

In a new report, the Work and Pensions Committee called for a mandatory disclosure regime and for regulators to be given additional powers to tackle non-compliance.

Committee chair, Frank Field, claimed that parts of the industry make a “fat living” off savers through misinformation and overcharging, and said he was unconvinced this would change.

“Government and regulators should not wait for the industry to fail to act voluntarily as they have so many times in the past,” he continued. “Ripping off savers could be eliminated.

“The committee is calling on the government to shine the searchlights into that part of the financial industry that has settled down to misinforming, mischarging and overcharging.”

The MPs said that information on charges, exit fees and other costs associated with pension transfers should be provided to members so they can see if they are getting value for money.

But they warned that some trustees are making investment decisions without knowing the true scale of the costs, and that asset managers can be unwilling to disclose charges.

“It is near impossible for investors to figure out how much their investments are costing them because additional costs are hidden and too high,” the MPs said in their report.

The committee also found that just 10 of the Financial Conduct Authority’s (FCA) 3,700 employees work on its dedicated scams team, and called on the regulator to review this.

Moreover, it urged the government to set a 0.75% charge cap on investment pathways, and to resolve the discrepancy between “net pay” and “relief at source” tax relief.

"The committee is addressing important issues here and some of the recommendations make absolute sense," Hargreaves Lansdown head of policy, Tom McPhail, said.

“Too much disclosure regulation fails to put the consumer in control of simple, clear information which allows them to save and invest with confidence. Pension dashboards will be a valuable tool to help people manage their savings.”

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