Work and Pensions Committee launches pension costs inquiry - AJ Bell comment

The Work and Pensions Committee has today launched a wide-ranging inquiry into pension costs, charges and value for money.
3 August 2018

You can read the terms of reference for the inquiry here: https://www.parliament.uk/business/committees/committees-a-z/commons-select/work-and-pensions-committee/news-parliament-2017/pension-costs-17-19/

Tom Selby, senior analyst at AJ Bell, comments:

“The FCA has already turned up the heat on platforms over costs and charges, zeroing in on the amount of money firms make for every pound of client money invested. Now MPs are set to make providers sweat as part of a broader drive to ensure savers are able to squeeze every last drop of value from their pension pot.

“This is absolutely the right focus and we look forward to engaging with the Committee as it digs into this important area. While cost is clearly only one component of value for money, it is a critical component and can have a huge impact on retirement outcomes over the long-term.

“We also welcome the Committee’s focus on engagement, which remains far too low among savers both while they are saving and as they enter retirement. The FCA is already looking at a series of interventions designed to get people interested in their pension, with a key aim to enable communications that are effective in nudging people into action.

“We believe in the wake of the pension freedoms there is significant room for simplification of the information providers are required to send to savers. These documents often run to 30 pages or more of complicated and confusing information which very few people pay any attention to.

“As an industry we should be aiming to make this information as simple and accessible as possible, but to do so requires a loosening of the regulatory noose around retirement communications.”

Work and Pensions Committee inquiry – the eight key questions from MPs

  1. Do higher-cost providers deliver higher performance, or simply eat into clients’ savings?

  2. Is the Government doing enough to ensure that workplace pension savers get value for money?

  3. What is the relative importance of empowering consumers or regulating providers?

  4. How can savers be encouraged to engage with their savings?

  5. How important is investment transparency to savers? 

  6. If customers are unhappy with their providers’ costs and investment performance/strategy, are there barriers to them going elsewhere?

  7. Are Independent Governance Committees effective in driving value for money?

  8. Do pension customers get value for money from financial advisers?

Follow us: