Work pensions value-for-money probed
Published on 18 January 2013 11:30 AM
An investigation into workplace pension schemes has been launched by the Government's trading watchdog amid concerns that savers are not getting value for their money.
Auto-enrolment began for employees of large companies in October and over the next five years up to nine million workers could join schemes as ministers try to tackle the pension savings crisis.
With the value of annual contributions into pension schemes expected to soar by around £11 billion by 2018, the Office of Fair Trading (OFT) is concerned that people with little experience of the pensions market will be victims of poor-value schemes, and smaller employers in particular could bring millions of new investors into outdated schemes.
Joanne Segars, chief executive of the National Association of Pension Funds (NAPF), said people are often 'very suspicious' about pensions and need to be reassured that they are being placed in the right scheme.
She said: 'Millions of people will get a new workplace pension under the much-needed auto-enrolment reforms and they need to have more confidence in the product. There is no point bringing them into a pension that they do not trust.'
Providers to be clearer on charges and costs
Last week, major pension providers agreed to show their charges and costs more clearly to people in workplace pensions, in what is being seen as a step in the right direction. But the OFT will consider whether competition between providers is tough enough to work in savers' best interests.
It will work with the Government, other regulators and pension bodies during its study into defined contribution (DC) pension schemes, which should be completed by August - when it will answer questions such as how big a pension people are likely to end up with and whether there is enough pressure on providers to keep their costs down.
Tom McPhail, head of pensions research at financial services firm Hargreaves Lansdown, stressed the importance of the OFT considering the relationship between workers and their providers.
He said: 'Without good member engagement it is unrealistic to expect good outcomes from DC pensions; any investigation which looks only at price without considering whether the services provided actually deliver good outcomes will only be looking at half the equation.'
Copyright Press Association 2013