A major offensive against charges in Group Pension schemes that offer poor “value for money” (often where schemes have been set up without Independent Financial Advice) has been launched by the Office of Fair Trading.
An OFT review of the £275bn ‘Defined Contribution’ workplace pension market found particular issues in relation to older group schemes sold prior to 2001, which represents around £10bn of savings.
Industry experts, such as Saga director general Ros Altmann, had predicted the regulator would introduce a cap on ‘base’ charges of 1 per cent. Ms Altmann stated that the move should also apply to the government-backed National Employment Savings Trust (NEST), which charges significantly above this level.
OFT has stopped short of a cap at this stage, but it has reached agreement with the Association of British Insurers and its members that provide DC pensions to carry out an “audit” of schemes that charge more than 1 per cent to “establish both the charges and any benefits associated with them”. The audits, which will be overseen by an independent project board, must report back by December 2014.
Paul Matthews, chief executive of UK and Europe for Standard Life, said advisers should reassess old style schemes their clients are in, something we at Mantle Financial Planning whole-heartedly agree with, and do as a matter of course for our clients.
Clive Maxwell, chief executive of OFT, said: “We have found problems in relying on competition to drive value for money for savers in this market. We’ve therefore worked closely with the government, regulators and industry to agree a set of measures that we believe are an important step in helping to ensure that savers get better outcomes.”
If you would like more information about how we can help with company group pension schemes, please contact us >>