Providers keeping customers 'ill-informed' on charges

A report from the Royal Society of Arts polled 23 firms, 21 of whom answered 'no' to the question, "Is it possible to get a breakdown of any charges", with two claiming the information is "pending".

And just seven of the respondents were able to say whether the annual management charge paid by investors covered other costs of running the funds, such as trading, to give an accurate total expense ratio.

The report, by Hermes Focus Asset Management chairman David Pitt-Watson, states: "Failure to declare the TER is particularly perplexing given that from June 2012, all funds covered by the European Ucits Directive will be required to show their TER.

"Since most pension providers are also providers of Ucits products, it is disappointing that they seem not to wish to give a full cost breakdown when selling pensions.

"So, right now we would conclude that pension savers are not being provided with adequate information. This means customers are ill-informed about the impact that costs have on the return on their pension pots.

"It is small wonder then that many people opt out of pensions altogether, while others end up with a pension pot that will not provide an adequate retirement income."

The report goes on to recommend providers be required to offer simple TER breakdowns in annual statements "like a bank statement".

It also calls for a 1.5 per cent cap on pension charges, in line with the stakeholder rules.