Asked by: Lord McFall of Alcluith (Lord Speaker - Life peer)
Question to the Department for Work and Pensions:
To ask Her Majesty’s Government what steps they have taken to promote (1) increased competition, and (2) the levying of fair fees and commissions, in the private pensions industry.
Answered by Lord Freud
The Government and regulators have introduced a package of measures, including establishing Independent Governance Committees to improve governance in contract based pension schemes, improved governance standards for trust based schemes and the introduction of a 0.75 per cent cap on charges in the default funds of schemes used for automatic enrolment. Subject to Parliamentary approval, these changes will come into effect from April.
The Government is also banning a number of charges which are no longer appropriate in the context of automatic enrolment into workplace pensions. From April 2015, we will extend the existing ban on consultancy charging to all contract-based schemes used for automatic enrolment. Likewise, adviser commission and Active Member Discounts, which penalise those who stop contributing or leave their employer and move jobs, will be banned in all schemes used for automatic enrolment from April 2016. We are also introducing measures to improve transparency throughout the value chain in the workplace pensions market and expect that this will lead to increased competition on costs and charges to the benefit of the consumer.
The recent pensions flexibility reforms are also an opportunity for the retirement income industry to develop new products that meet the evolving needs of consumers. The new flexibility will help consumers choosing to select an annuity or another option to access their pension savings to get a better deal in a more competitive market place. The shape of the market will now be driven by the choices consumers make, placing power back into the hands of savers.
Furthermore, as of the end of December, over 5.1 million workers have been automatically enrolled into a workplace pension. This is having a significant impact on the private pensions market and by 2020, we estimate that automatic enrolment will have generated an additional £8 to £12 billion a year in workplace pension saving. The growth in this market is supporting strong competition between providers and schemes.
Asked by: Lord McFall of Alcluith (Lord Speaker - Life peer)
Question to the Department for Work and Pensions:
To ask Her Majesty’s Government what steps they are taking to ensure that the charges, fees and commissions paid by consumers in relation to private pensions are transparent.
Answered by Lord Freud
The Government is committed to improving the transparency of costs and charges in workplace pension schemes. The Government’s Command Papers ‘Better Workplace Pensions: Further measures for savers’ and ‘Better Workplace Pensions: Putting savers interests first’ published in March and October 2014 set out a range of measures including a cap on charges in default fund arrangements, a ban on inappropriate charges and proposals to introduce minimum governance standards and improve transparency across workplace defined contribution schemes.
The Government has recently consulted on draft legislation which, subject to parliamentary approval, will introduce new requirements on trustees to improve the transparency of costs and charges in occupational schemes from April 2015. Under these new requirements, trustees will be required to annually report on costs and charges for the first time. Similar rules are to be introduced by the Financial Conduct Authority to require the newly formed Independent Governance Committees to report on costs and charges in workplace personal pension schemes.
Later this year we will consult on ways to build on this first phase of enhanced transparency, to meet our duties under the Pensions Act 2014 requiring information about transaction costs to be disclosed to members of workplace pension schemes, and the publication of costs and charges information. The FCA also intends to consult on amending its rules to with a view to introducing equivalent enhanced transparency provisions for workplace personal pension schemes during 2015.