Supporting consumers and the industry

Over the past few months I have been working on a number of measures that will support consumers, such as the single financial guidance body, and the bill that introduces it is expected to finish its journey through parliament early next year.

It is a challenge for us all to think how costs and charges can best be presented to make them meaningful information

Anyone turning to the new body will receive essential information and guidance on all matters relating to private pensions. No matter what a person’s financial circumstances are, it is hugely important that they are planning for retirement and thinking about the day when income slows down.

In line with this and encouraging greater engagement with pensions savings, our ambitious plans for the pensions dashboard will help people better understand their pensions and make informed decisions about how to fund their retirement. Over the coming weeks I will be meeting with a range of consumer groups and providers to hear their views and aspirations as to how we can make the dashboard as meaningful as possible to consumers.

The industry has a role too in encouraging engagement with pensions savings, by ensuring greater levels of transparency so people are aware of where their money is invested and any charges they will be paying to manage their pension pot. 

Proposals to improve transparency and engagement

The latest pension charges survey showed that the vast majority of eligible members are paying well below the 0.75 per cent cap introduced by government, which shows how the industry is responsive and embracing the challenge. However, the survey also showed a clear lack of transparency on some costs in pension schemes.

As a result, we have developed a number of proposals on which we will be working with the industry, including requiring that members’ annual benefit statements explain where they can find the costs and charges for their scheme. This will ensure that savers will also be able to access information about where their money is invested, opening up the possibility of people consolidating their pension pots in a scheme better suited to them.

The publication of charge and transaction cost information will enable pension scheme trustees and others to compare the value for money they are receiving with their peers, driving better market outcomes. To ensure that this information is truly accessible we are asking schemes to publish an illustration of the compounding effect of the costs and charges affecting their pension savings. Fundamentally, these changes will not support consumers if they are tucked away in the small print, and it is a challenge for us all to think how they can best be presented to make them meaningful information.

Additionally, last month we confirmed that mastertrust pension schemes will need to meet five key tests in order to continue operating. The new ‘authorisation and supervision regime’ will ensure that consumers and mastertrusts alike will be strengthened by requiring the latter to meet strict criteria on all aspects of operations and governance.

As we near the end of 2017, I would like to take this opportunity to wish Pensions Expert readers a happy Christmas and thank you for your engagement and support over the past few months. I look forward to hearing your thoughts and working with you closely on projects like the dashboard in the new year.

Guy Opperman is the minister for pensions and financial inclusion