Full disclosure of pension charges is essential if scheme members are to gain value for money and subsequently refrain from opting out post-auto-enrolment, according to Gregg McClymont, shadow pensions minister.
Although annual management charges (AMCs) are published, this is insufficient, he added. “AMCs may comprise less than a third of total costs, while transaction costs, exit charges and active member discounts can all eat away at an individual’s pension pot,” McClymont said. “Costs and charges should ultimately be disclosed as a pounds and pence figure.”
A failure to understand charges could have a significant impact on smaller employers, particularly as they approach auto-enrolment. “The danger of excessive charges in the first round of auto-enrolment is surmountable because larger employers may have the muscle and expertise to negotiate good deals,” added McClymont.
The coalition should also lift the restrictions currently placed on the national employment savings trust (Nest) so that it can compete with other providers, such as Now:Pensions and the People’s Pension, on a level playing field, said McClymont. These include the ban on transfers in and the cap on contributions.