As tens of thousands of SMEs, including numerous Umbrella Companies, negotiate with pension providers to prepare for their auto-enrolment staging dates this year, the House of Lords is considering amendments to the Pensions Bill aimed at ensuring greater transparency in pension plan charges.
The government is concerned that a charge of 1.5% could translate, over the course of an average working life of 46 years, into a pension shortfall of almost £250,000. Recent research from the Department of Work and Pensions (DWP) suggests that annual management charges for pensions have, on average, fallen from 0.95% in 2011 to 0.84% in 2013; even so, some commentators have warned that employees remain in the dark about the total charges they will incur over their working lives.
The head of pensions research at Hargreaves Lansdown, Tom McPhail, said: “It is vital that the millions of employees being auto-enrolled into workplace pensions can be confident that they are getting a good deal from their pension company. It is not enough for pension companies to have competitive charges; they have to be seen to have competitive charges.”
Following the Office of Fair Trading’s report last year that found “insufficient visibility and comparability of charges” in pension plans, the House of Lords will this week debate the area seen by many as the most complex: defined contribution auto-enrolment schemes.
A spokesman from the DWP said: “A lack of transparency around the true cost of schemes can prevent savers from having value for money. We will outline our proposals to tackle this issue shortly.”