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OFT to investigate if company pensions are any good

The Office of Fair Trading has launched a study into company pensions to see if they are fair and good value. The move comes as the government has started to 'auto-enrol' millions of workers into employer pension schemes.


by Michelle McGagh on Jan 17, 2013 at 12:54

OFT to investigate if company pensions are any good

The Office of Fair Trading (OFT) has launched a study into company pensions to determine whether they are good value for money and how much workers can expect retire on.

The OFT is looking at 'defined contribution' (DC) schemes, where the size of the pension pot at retirement is determined by how much money is put into it (by employee and employer) and how much this money grows over the years.

This type of scheme has largely replaced the traditional final salary or 'defined benefit' (DB) scheme, where employers took on most, if not all, the responsibility of providing pensions linked to their employees' pay.

The number of defined contribution schemes is set to rise dramatically thanks to the new government policy of automatically enrolling workers into their company pension schemes, if they earn over a minimum amount and do not yet contribute to a pension plan.

Four million people in the UK currently save into defined contribution pension schemes run by their employers but membership levels are expected to swell to beween six and nine million by 2018 as a result of auto-enrolment.

The OFT expects the new arrivals will save an extra £11 billion a year into pensions in five years' time. 

The consumer watchdog says it wants to look at:

  • How pension providers compete with one another and how the market may develop over time;
  • Whether there is sufficient pressure on pension providers to keep charges low and how much information about charges is available to savers;
  • Whether smaller firms face difficulties in making pension decisions in the interests of their employees;
  • Whether smaller firms receive appropriate help and advice in setting up and running a workplace pension;
  • Barriers to switching between schemes and a potential lack of employer engagement in setting up and managing pensions.

Mary Starks, senior director at the OFT, said the workplace pensions market was set for rapid growth and change. ‘It is important that these savers get a good deal. We want to take a look at the market now to ensure that providers are competing to offer the best possible deals, and that the choices made by employers mean that employees are saving into good pension schemes for their retirement.’

To find out more about auto-enrolment and pension charges, check out these guides from The Lolly:

5 comments so far. Why not have your say?


Jan 17, 2013 at 16:14

The OFT should forget that study but rather concentrate on the public sector pensions, and compare them to the private sector and are the general public, most of whom are in the private sector, getting good value for the tax payer funded pensions, many of those paying not getting anything like the pensions (if at all, other than the State pension) splurged out, and in particular the pensions being made available to the top public execs, quangos, LA execs and specifically the pensions for MPs, period earned etc, etc, particularly the return to the MP for the salary range, when in the private sector they are no virtually non existent and should the aforementioned not be paying a lot more to get these fabulous provisions?

Furthermore, they should examine in detail the costs being charged to SIPP pensioners, which are a scandal, as well as the tax thereon on death.

They should also open a detailed investigation, in public with cautions issued, of the Zanuliebore pension theft (not just Bliar, Brown, Balls, Cooper Jackboot, the silibands etc) and the continuation of the theft by this govt.

Office of Fair Trade, do you job without fear or favour. Discharge your obligations. Thus far you have been paid for not doing your job. Bite the bullet. Unfortunately, at the behest of the well off (Govt and leeches) you are concentrating on the wrong sector. The injustice comes from govt.

I await seeing that the felons are going to be prosecuted.

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Michael Stevens

Jan 17, 2013 at 17:41

A Group Scheme of Personal Pension Plans or Stakeholder is the best for all.

Contributions on 50/ 50 basis and a total charge of less tha 1%

Company scheme is a thing of the passed.

All Final Salary should be shut.

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Jan 20, 2013 at 09:32


i like the way you think..stating the guaranteed return above inflation that reflects a notional salary foregone in order to make after tax contributions into defined benefit pension schemes would, indeed, be highly illuminating.

My estimate (top of the head) is that the government sector receives the equivalent of a 35% gross increase in pay (more than 100% for MP's and MEP's) plus, of course, the ubiquitous inflation proofing.

of course, our politicians are worth every penny!

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Roger Bailey

Jan 21, 2013 at 18:08

The result of the investigation will be that they are no good. A £100k pot currently provides a 65 year old with a single life,level, no guarantee annuity of $5824 per year. Considering average life expectancy for a 65 year old is currently 80, that means, over 15 years you will get back £87360. £100k in a cash ISA paying interest of 3% would enable you to withdraw £8132 per year before depleting the account in 15 years.

Why would any sane person want to pay into a DC pension where they cannot touch their pot until they are 55.. Over the period 2000to 2010 I invested into both index tracker ISA's and cash ISA's. Their performance was almost identical. I don't think a pension fund will perform any better considering their high costs/charges.

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Roger Bailey

Jan 21, 2013 at 18:31

The carrot of tax relief on contributions is a scam ,as you don't actually receive any benefit from it until you withdraw from your pot.but you actually pay for it now as it comes from currrent general taxation which you are also contributing to and which they have to keep to a sufficient level to fund all the other governemnt expense.i.e they give with one hand and take back with the other.One hand takes now and the other gives back when you are 55 or older.

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