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UK pension industry faces transparency inquiry
As Australia’s superannuation industry undergoes its own grilling at the Royal Commission, the UK Government has announced the Commons Select Committee will hold an inquiry into pension costs and transparency.
The inquiry would examine whether the pensions industry provides sufficient transparency around charges, investment strategy and performance to consumers.
It comes off the back of the Committee’s recent inquiry into pension freedom and choice, which found that some scheme members were being “shamelessly bamboozled” into signing up to unsuitable ongoing adviser fees. The Royal Commission in Australia yesterday focused on the same issue of adviser charges.
The inquiry’s terms of reference specified that it will examine whether enough is being done to ensure individuals:
- get value for money for their pension savings;
- understand what they are being charged and why;
- understand the short- and long-term impact of costs on retirement outcomes;
- can see how their money is being invested and how their investments are performing;
- are engaged enough to use information about costs and investments to make informed choices about their pension savings; and
- get good-value, impartial service from financial advisers.
The Committee said that a rapid rise in enrolment in workplace pension schemes in recent years, combined with a sharp increase in demand for drawdown products spurred by pension freedoms, provided the background to the inquiry.
“These developments have intensified concerns about the effect of investment management charges, transaction, advisory and other intermediation costs, in eroding the value of individuals’ savings,” the Committee said.
“These are part of broader concerns that low levels of customer engagement and understanding, coupled with costly and opaque intermediation, risk leading to poor outcomes for pensioners.”
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