Clearer standards are needed to resolve the charges debate once and for all
There is so much noise about charges in the pensions industry.
Whether you are a campaigner for more transparency or a provider trying to defend the status quo, the clamour is seemingly endless. No wonder Steve Webb and the government have felt compelled to act quickly; too quickly sometimes, as was the case with the charges cap.
Webb’s latest announcement that the government will make the disclosure of transaction costs mandatory has been broadly welcomed by the industry.
Gina Miller, founder of SCM Private and the True and Fair Campaign responded to the news saying: “it is staggering that it takes government action to make the pensions industry disclose these costs to pension savers.”
Is it so staggering? Fundamentally, providers are motivated by the need to maximise profits for their shareholders, which has resulted in some cynical cases of mispricing and maladministration recently (State Street’s recent FCA fine springs to mind).
The bloated investment industry has become expert at hiding its worst excesses
It has been left up to trustee boards and governance committees to make sure they are getting a good deal for end investors. Unfortunately, they have not always been successful. The Office for Fair Trading highlighted legacy schemes as a particular area where added layers of expense have crept, or been built, in.
But the blame cannot be placed solely at the door of trustees; in many cases, they haven’t done anything wrong at all. The bloated, overly complicated investment industry has become expert at hiding its worst excesses in dark corners.
For this reason, some in the industry believe that the government and regulators need to go further still.
I think it comes down to standardisation
“Personally I think it comes down to standardisation,” says Darren Philp, head of policy for mastertrust The People’s Pension. “Government and regulators need to set out how pensions can be charged for and then that’s it. No other hidden charges.”
Government and regulators should lay down the law and set clear and prescriptive rules for how charges are disclosed rather than allowing the industry to formulate its own, inconsistent and acronym-filled charging structures.
Perhaps then they could achieve what sounds so simple but in reality is the hardest thing of all: a good member outcome.