LONDON (Reuters) - Private pension companies will be forced to reveal fees and charges taken from employees' retirement savings under an agreement drawn up by the Association of British Insurers (ABI), it said on Friday.
ABI members include pension and insurance organisations running some of the UK's biggest pension schemes. The new agreement is supported by the likes of Aviva, Axa and Prudential.
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 fees. The average annual management charge on a workplace pension scheme is 0.77 percent, according to the ABI.
As a result, the government and industry watchdogs have been pressing for greater transparency. ABI developed the agreement in conjunction with the Financial Services Authority (FSA) and the Pensions Regulator, as well as the Department for Work and Pensions and the National Association of Pension Funds.
The scheme will be implemented in 2014 for auto-enrolment pension schemes, and in 2015 for all other workplace pension schemes.
Pension schemes will have to disclose any entry or exit charges, and the total costs and charges made for managing a retirement plan and its investments, the ABI said.
"The industry must be ambitious in its timescales for achieving greater transparency," UK pensions minister Steve Webb said in a statement, adding he hoped to see more providers across the industry sign up to this agreement.
The government-backed auto-enrolment scheme, whereby people are required to opt out rather than opt into retirement saving, could lead to up to 6-10 million additional workers being signed up for pensions.
The National Association of Pension Funds, the Investment Management Association and the Society of Pension Consultants also want their members and participants in the pensions market to follow the practices set out by the agreement.
Reporting by Sarah Mortimer; Editing by Sophie Walker