Call for pension costs transparency

Plans to improve transparency over pension charges to help boost confidence in the system have been announced by insurers.

The Association of British Insurers (ABI) wants to develop an industry protocol by the end of the year to ensure that all workers receive regular, clear and meaningful information about costs as their funds build up, which would also help them to compare schemes more easily.

It said that for "too long" people have not had enough information about what they are paying and greater transparency about costs would encourage them to remain in pensions. The ABI has written to the Pensions Regulator and the Financial Services Authority to help it work on a plan to make the system more consistent.

The call comes just weeks before the Government's landmark initiative to automatically enrol up to 10 million people into workplace pensions, starting in October with larger firms, amid concerns that people are not putting aside enough for their later years.

The pensions system was criticised by the Institute of Directors in April, which said that it must be radically simplified, as it is being bogged down by a "forest of regulation" which is putting people off.

The ABI said it wants to see a "consistent and simple" disclosure of charges to employees across the range of different pension schemes, which are often subject to differing rules and regulations.

It said that existing workplace schemes should ensure that employees are provided with clear and full information on charges to help employees make the right decisions about their pension.

Otto Thoresen, ABI director general, said: "Auto-enrolment will have a critical impact on the future retirement prospects of today's workers. If we are to minimise opt-outs it will be vital that employees understand what they are paying and have confidence in the pensions they are being auto-enrolled into."

He added: "For too long, different parts of the private pensions system, regulated by two different regulators, have given employees too little information about what they are paying. Openness and transparency are now expected by customers, so we all have to do better. I have written to the Pensions Regulator and FSA to set out what I believe we can achieve together."

The National Association of Pension Funds (NAPF) said that people have to be able to work out whether or not they are getting a good deal as automatic enrolment approaches. Darren Philp, director of policy at the NAPF, said: "Communication needs to become simpler and more transparent across the pensions landscape. Savers must not be overloaded with unfathomable small print."