Personal PensionSep 29 2020

Interactive Investor calls for workplace pension comparisons

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Interactive Investor calls for workplace pension comparisons

Interactive Investor has warned savers are being "left in the dark" as the direct-to-consumer platform called for greater transparency surrounding percentage-based workplace pension fees.

Richard Wilson, chief executive at Interactive Investor, warned percentage fees were a principle which still underpinned the charging structure at "most investment companies".  

But he added: "You may now see a pounds and pence comparison on your annual statement, but it won’t tell you the impact these charges will have over time.

"Customers should not be expected to put up with this sort of treatment, there needs to be greater transparency around these fees and the regulator has the power to ensure this." 

The plea came in response to a consultation launched by the Financial Conduct Authority this summer in a bid to ensure members are getting the best possible value for money in workplace pensions. 

The paper included proposals by the regulator to make it easier for both Independent Governance Committees and Governance Advisory Arrangements to compare pension products and services to determine whether members are being treated fairly.

Interactive Investor has called for these comparisons to be made between a "reasonable number" of schemes from within the wider pension market, including, it suggested, the "more modern self-invested personal pension schemes that can potentially offer more value and choice". 

Mr Wilson said: "It’s no surprise that four of the five largest transfers into the Interactive Investor Sipp come from the big life companies, typically old workplace pensions that cost a fortune.

"Despite their best efforts, customers eventually figure it out, and vote with their feet – but most people are completely in the dark when it comes to comparing pension products."

But Steve Webb, partner at LCP, warned whilst greater clarity and transparency of charges was always welcomed, very few individual scheme members would engage with such data. 

Mr Webb said: "Even where data is available it can be extremely hard to interpret without expert help.

"Under automatic enrolment it is the employer rather than the member who chooses the provider, and it seems unlikely that many members would actively seek out charges data and put pressure on their employer to switch to a new pension provider. 

"What is needed is for IGCs to do their job, obtain meaningful charging data from providers and asset managers, and apply pressure where they believe costs and charges do not represent good value for members." 

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