Lizzy Holliday, Head of DC, Master Trusts and Lifetime Saving at the Pensions and Lifetime Savings Association (PLSA), said: “The charge cap on DC pension schemes is an important consumer protection, ensuring savers receive better value for money from their pensions. DWP’s findings are consistent with our own: in practice most DC schemes’ default funds operate well below the charge cap.
“We’re pleased the government recognises the work the pension and investment industries have undertaken via the Cost Transparency Initiative (CTI) to establish and promote new industry standards for cost reporting. Recently, the CTI published additional templates which will further help pension schemes drive value for money for their savers by allowing them to compare costs across their investments more easily.
“That doesn’t mean the pension industry is standing still. The PLSA is working with our members to achieve even better outcomes for all savers, including finding solutions to the small pension pots issue.”
Key points in the PLSA’s response:
• The PLSA has long supported the pension scheme charge cap and cost transparency and welcomes the great strides that the whole industry has made.
• It is important for scheme members to have access to clear, concise information about their scheme’s investment approach.
• While costs and charges have a real impact on members’ funds, value for money in pensions needs to be seen in the round and should not be reduced to a discussion about cost alone.
• Well governed schemes are able to deliver value for money for their members regardless of pot size.
• Most schemes are operating well within the existing charge cap.
• The PLSA does not support lowering the existing charge cap. Lowering the charge cap is likely to reduce sophistication and dampen innovation in default investment strategies, particularly by reducing some schemes ability to allocate to private and less liquid asset classes.
• The PLSA does not support the inclusion of transaction costs within the charge cap as it risks deterring trading that is in the best interest of members, particularly within less liquid asset classes.
• The PLSA does not think that restricting flat fees is a suitable intervention to the very complex issues associated with the proliferation of small pots. We encourage the government to consider the impact of small pots on scheme members more holistically, and contemplate interventions that do much more to reduce or manage the proliferation of small pots.
• We are pleased the government recognises the work that the pensions and investment industries have undertaken to make the launch and first year of the Cost Transparency Initiative (CTI) a success. The CTI is a an initiative led by the Pensions and Lifetime Savings Association (PLSA), Investment Association (IA) and the Local Government Pension Scheme Advisory Board (LGPS SAB) to help improve and standardise the reporting of investment costs and charges.
• In a recent survey of schemes and advisers, we found that 74% of respondents said they have a good level of awareness of the CTI framework. Over half of respondents said they have already either used the CTI framework, directly, or using third-party information providers or intermediaries. We find that adopters represent a broad range of pension schemes, for example, from large to small, DB to DC and hybrid, Master Trusts, LGPS pools and single employer schemes.
The full submission is available here.
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