Responding to the Office of Fair Trading (OFT) report into workplace pensions, Otto Thoresen, the ABI's Director General, said:
"Auto-enrolment has the potential to transform retirement savings in the UK and the pensions and long-term savings industry is determined to do all it can to make the reforms necessary to build confidence and trust in workplace pensions
"The schemes principally identified by the OFT as potentially having charges not representing good value for money account for around 10% of the nearly £300 billion assets managed by the industry, including closed schemes and schemes that will not be used for automatic enrolment. But we agree with the OFT that it is important to review charges to ensure they represent good value for money for today's employers and savers. Pension providers have agreed to an audit of all legacy and higher charging schemes to ensure any problems can be sorted out.
"We also agree with the OFT that with millions of new savers being auto-enrolled into work place saving it is important that schemes are governed in a way that ensures good value for money for employees. The industry has discussed this in detail with the OFT and will set up independent governance panels to make sure this commitment is met.
Otto Thoresen highlighted how pension charges continue to fall:
"The impact of new technology, stakeholder pensions and auto-enrolment have combined to drive prices down consistently over the last decade. Pension charges are lower, more transparent and more understandable than ever before. This is good news for people saving into a pension. But it is important to remember that the level of contribution and how long someone works remain the most important factors in determining an individual's overall retirement income.
"The pensions industry is reforming and changing. It is determined to build greater trust from consumers and employers so auto-enrolment can achieve its potential. We will continue to work with Government and other stakeholders in ensuring that pension reform is a success. The OFT report has been an important contribution to achieving that goal."
Committees for workplace pension schemes announced today will be established by mid- 2014 and will:
- Oversee the value for money of workplace pension products, and make recommendations to pension company boards who must respond on a ‘comply and explain' basis.
- Provide annual reports to pension company boards and a statement to the Pensions Regulator.
- Have a majority of independent members, including an independent chair.
All ABI members offering workplace pensions will also be auditing the value for money of older pension schemes under a Project Board comprising DWP, OFT, regulators and the industry. This should be completed by December 2014.
Industry initiatives to help savers get value for money pensions and improve their confidence in savings include:
- An industry agreement on disclosure of pension charges, under which pension charges will be disclosed to a standard definition.
- The Retirement Choices Code to ensure that people approaching retirement have more information about their pension choices and help in shopping around for the right pensions deal.
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