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Pension charges need to be standardised and made fully transparent if government proposals for driving down costs to pension savers are to succeed, a leading pension provider said today.
B&CE, providers of The People’s Pension, responded to the launch of the government’s charges consultation by welcoming government action, but warning that it risks not going far enough if it fails to standardise pension charges.
Darren Philp, Head of Policy at The People’s Pension, said:
“We have long been arguing for clearer, simpler and more transparent pension charges. Today’s consultation is a step in the right direction and a positive contribution to the debate.
“However, before considering capping charges, you need to introduce a standard charging structure. This is essential to safeguard consumers, enhance competition and ultimately improve consumer outcomes. Without this transparency and consistency DWP efforts to drive down costs could prove futile, with consumers being the ones to suffer.”
A key concern of B&CE’s is that government action does not inadvertently encourage models that might not be in the best interests of the saver. By reinforcing dual pricing models as a legitimate way to charge for pensions, the government has potentially opened the door to providers who just want to make a short term gain.
“By accommodating dual charging structures, there is a real risk that the DWP’s approach could open up the way for providers to innovate their charges in a way that is not in the best interests of scheme members.
“Our view is that pension providers should focus on value for money – giving the best product possible at the cheapest possible price – rather than inventing new and often obscure methods of charging.”
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.