Out-Law News | 28 Feb 2014 | 10:48 am | 1 min. read
The proposal, which will now be debated by the UK parliament as part of the most recent draft of the Pensions Bill, is intended to help employers offering DC schemes to see exactly how much they are paying the provider for asset management services. Disclosure will also enable pension scheme members to see that they are getting value for money.
Pensions expert Mark Baker of Pinsent Masons, the law firm behind Out-Law.com, said that the announcement came as part of a government drive to improve transparency around the true cost of pension schemes. It follows an announcement by the Department of Work and Pensions (DWP) that the introduction of a planned cap on pension scheme annual management charges would be postponed until after the 2015 general election.
"The reality is that we won't know how the new regime on charges and costs will work until after the election," he said. "Really, this is good news: it can't make sense to put pressure on providers' charges right at the moment when they are all facing up to a huge influx of new members. And restrictions on charges make it harder for new, creative providers to introduce products aimed at the selective end of the market."
"In the meantime, providers will be required to disclose transaction costs – and most of them won't particularly welcome that. The bottom line is that disclosing the detail of charges and costs doesn't help consumers or employers to choose a good pension – it's the other developments currently happening in DC pensions that will help to reach that stage," he said.
Further details about the implementation and timing of the measures will be published shortly as part of the DWP's response to its consultation on charges, including the annual management charge cap, according to the government. It will also publish proposals to improve the transparency and comparability of information about scheme quality and costs, as recommended by consumer protection regulator the Office of Fair Trading (OFT) as part of its recent review of the DC pensions market, it said.
Transaction costs are those that result from the trading necessary to invest the assets paid into the scheme, and are usually deducted directly from the pension fund. They can include the commission paid to brokers, bank transaction charges and the stamp duty paid when a fund manager uses a pension pot to buy or sell shares.
Pensions minister Steve Webb said that the government was committed to "shining a light into the murky corners of the pensions industry to make sure savers know what is happening to their money".
"We're taking action to ensure consumers have access to good quality pension schemes so they have the confidence to plan for their futures," he said.