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B&CE, the UK’s largest stakeholder pension provider, who also offer one of the leading automatic enrolment pensions in the form of The People’s Pension, today called for the introduction of compulsory, industry-wide standardisation of charging practices.
B&CE have long campaigned for an industry wide revolution in charging behaviour. They have done so by lobbying the likes of industry bodies the ABI and NAPF as well as policymakers. However, they felt now was the time to make their views known more publically given recent comments from the Pensions Minister around price capping as well as the findings of the Office of Fair trading (OFT) Market Study findings last week.
Jamie Fiveash, Director of Customer Solutions at B&CE, said:
“B&CE would like to see the introduction of compulsory standardisation of charging practices at the point of sale.
“Almost 30 different charges currently exist; initial service costs, active member discounts, AMCs and so on – making comparison between schemes extremely difficult for employers and virtually impossible for consumers.
“A standard charging structure or measure across all providers would safeguard consumers, enhance competition and ultimately improve consumer outcomes. Pension providers should focus on giving the best product possible at the cheapest possible price, rather than inventing new and often obscure methods of charging.”
Simplicity in charging structures is a key driver in safeguarding consumers, helping employers and ultimately improving consumer engagement and outcomes.
The People’s Pension operates a simple and transparent charging structure of a 0.5% Annual Management Charge with no hidden charges, fees on transfers, active member discounts or additional charges for employers.
In contrast state backed NEST charges what superficially seems to be a lower charge of 0.3% AMC but they also charge a 1.8% contribution fee. This means that a charge of 1.8% will be made for each contribution, so if a member’s contribution is £100, £1.80 will be deducted before any money is invested. Similarly NOW Pensions, the Danish Government backed scheme charges a 1.5% contribution fee and a 0.3% AMC.
Other providers and types of scheme can be even more confusing with many paying commission or fees to third parties such as advisers. Again B&CE does not do this, stripping out another layer of potential cost confusion for consumers.
Jamie concluded by suggesting industry bodies had taken steps in the right direction, that much more needed to be done and compulsion now seemed to offer the best means of protecting savers:
“Recent initiatives from the likes of the IMA, NAPF and the ABI have all helped to improve the situation but they are not sufficiently consistent and pricing problems remain. The time for policymakers and regulators to act on pricing is long overdue.”