LONDON (Reuters) - Pension firms and insurers are calling for the costs taken automatically by people running UK pension schemes to be divulged to employers when they set up auto-enrolment schemes between 2012 and 2017.
Pension charges have dramatically reduced in recent years, and now stand at 0.52 percent of the value of an individual scheme, says the Association of British Insurers (ABI). But the little-known fees and levies can wipe tens of thousands of pounds off the value of a worker’s workplace pension.
Private pension firms have been accused of failing to disclose some of the costs they levy on customers’ investment funds, leaving people unaware that their pension savings were being eroded by the charges.
Industry associations have created a joint Code of Conduct for disclosing the charges made on workplace pensions for managing a retirement plan and its investments, the firms involved said in a statement on Wednesday.
The average so-called ‘annual management charge’ on a workplace pension scheme is 0.77 percent, the ABI said.
Umbrella organizations The National Association of Pension Funds (NAPF), the ABI, as well as the Investment Management Association and the Society of Pension Consultants want their members and participants in the pensions market to follow the practices set out by the code.
Employers will be able to chose which pension scheme they want based on the information on charges, costs and services.
UK pensions minister Steve Webb said he hoped to see “widespread adoption” of the code.
“However, we are prepared to consider taking action more broadly on charges if insufficient progress is made,” he said in a statement on Wednesday.
In January 2013, the code will be available to use for a template for explaining charges, followed by the launch of a web tool in April 2013, which is being produced by the ABI.
The government backed auto-enrolment scheme, whereby people are required to opt out rather than opt into retirement saving, could lead to up to 8 million additional workers being signed up for pensions.
Editing by Hans-Juergen Peters