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Review: Private pensions too costly
Liam Byrne said pensioners currently face losing up to half of their pension pot to charges and hidden costs
Private pensions in Britain can be too expensive and not trusted by people entering retirement, Labour said following a policy review.
Some 10 million private sector workers across the UK are set to be brought into pension schemes from October under new auto-enrolment laws coming into force.
Labour said a new low-cost scheme, provided by a Department for Work and Pensions quango called Nest, would help but added the scheme had limitations.
Shadow work and pensions secretary Liam Byrne said in the current worst cases, pensioners face losing up to half of their pension pot to charges and hidden costs.
The review highlighted the Australian government's automatic enrolment rules which are coming into effect next year. Mr Byrne called for pensions in Britain to be made the world's best.
Publishing the review, Mr Byrne said: "Labour is determined to be the party of hard-working savers. That's why I'm saying very clearly today that I want to see the best private pension system, working for people who do the right thing and save for the long term.
"Right now, a worst-case scenario could see a pension saver lose up to half of their pension thanks to hidden costs and charges. That's wrong and it shouldn't be allowed. We all know we need to save more for the future. That means we need a system that builds your pension pot, not eats your pension pot.
"We've got some great pension companies in Britain. But with an extra 10 million about to be brought into private pensions, we're determined to make sure savers are served by every pension company playing to the standards of the best."
In a policy review document published by Labour, the party said it had identified several "root causes" of problems with the current pension framework. These include a failure of the market to work effectively and competitively, meaning people struggle to choose an effective product. The problem is exacerbated where, as is common, employers choose a pension scheme, meaning employees may not have the best pension for their needs.
Labour said there were issues with pension accountability, with few schemes managed by independent trustees. The party said the forthcoming Nest scheme, resulting from legislation passed by Labour with cross-party support, is a low-cost public alternative for private workers but has been set up to limit annual contributions to £4,400 per year. Labour said it was also unavailable to 690,000 low-paid, part-time workers - a position the party said was "wrong" in its review.
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