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The OFT pensions market study, published today, suggests that some savers do not get value for money.
The study highlights that employers, which have the responsibility of deciding which pension scheme to choose for their employees, may often lack the capability or the incentive to assess value for money. This problem will grow during automatic enrolment as smaller employers, with limited resources, are required to provide schemes for their employees.
This is something that The People’s Pension has often highlighted and is one of the reasons why it has called on government and The Pensions Regulator to make businesses aware that there are alternatives to NEST, rather than reinforcing the myth that automatic enrolment and NEST are one and the same thing. The importance of choice cannot be underestimated in this area.
The OFT’s recommendations that it be given greater powers are sensible. Similarly the OFT’s desire to ensure that the DWP does more on improving the transparency and comparability of information, about the cost and quality of schemes – in order to make employers’ initial choice of scheme easier – is both welcome and overdue. This could easily be achieved by the introduction of an industry-wide charging structure so that consumers and their employers can make an informed choice.
Commenting on the study, Jamie Fiveash, Director of Customer Solutions at B&CE said:
“We welcome much of what is being suggested by the OFT today, although we do not feel they are being sufficiently radical in their approach.”
Jamie highlighted that B&CE had previously suggested a number of radical reforms that would improve the market and lead to better outcomes for consumers:
“Two much needed steps should be taken. Firstly it should be much easier to make pension transfers from old and poorly governed legacy schemes into large scale, modern and well governed schemes.
“Secondly, policymakers should consider introducing a compulsory, standard, transparent, industry-wide charging structure so that consumers and their employers can make an informed choice rather than having to consider the implications of the multiple types of charges that currently exist in the market. This will ensure competition on products and service delivery, rather than on obscure charging mechanisms, inevitably leading to the driving down of prices.”