Renewed calls for charges transparency in annual statements

A report, published on Tuesday by research group Ignition House and Ruston Smith, non-executive chair of the Tesco Pension Fund, found that savers wanted both defined contribution schemes and providers to demonstrate charges clearly and consistently on annual statements. 

Savers that took part in the research, which polled 1,016 current and deferred DC members, added that if providers and schemes were unable to provide individual member charges, they would consider them untrustworthy.

While there is currently no requirement to include the consistent disclosure of the costs and charges that pension savers pay to their provider for running their pension scheme, there remains a significant gap in the information provided to savers. 

To date, there has been no agreed approach as to the best way to provide this information on annual statements across all trust and contract-based schemes, or whether it should be shown at all.

Pensions Expert reported last year that the government abandoned plans to make pension providers include costs and charges in their new simplified annual statements.

Smith said: “Not surprisingly, it’s the value of members’ savings at retirement that matters most — the money in their retirement pot. But members also want to see the costs that are charged and taken out of their savings on all their annual pension statements, presented in a consistent, clear and simple way, in pounds and pence.

“This research asked the industry’s customers how they want the charges they actually pay to be shown on all the annual pension statements they receive. Listening to pension savers, the industry’s customers, is critical in delivering what works best for them.”

The Pensions Regulator, the Department for Work and Pensions, and the Financial Conduct Authority, along with industry representatives, agreed on the method and content of the research to ensure it was carried out independently and robustly.

According to the report, the findings have been passed on to the DWP for consideration as to how they can be used and applied.

Laura Andrikopoulos, head of DC governance at Hymans Robertson, said the report provides an “illuminating insight” into members’ views on DC pension scheme costs and charges.

“The key findings show that members fully appreciate that value is more than headline costs and charges, and that it is outcomes at retirement that really matter when comparing schemes rather than a simple focus on charges – although it is very important members understand exactly what these charges are and consist of,” she said.

“The research also highlights that members expect their employers to scrutinise provider provision and continue to push for maximum value for their employees This is the crucial task of any governance committee overseeing outsourced provision and a continuing focus for trustees.”