Pension providers agree to make charges clearer

Big insurance companies have signed up to new set of disclosure rules to make pension charges more transparent.

The Association of British Insurers (ABI) has set out rules to ensure straightforward disclosure of workplace pension charges, which tend to be confusing and difficult to compare with other schemes.

The charges agreement, which has so far been signed by 15 ABI members, will be implemented in the summer of 2014 for new schemes established under auto-enrolment. This is the new government programme requiring employers to set up pension schemes and encouraging their workers to sign up. 

All other workplace pension schemes will be bound by the disclosure rules from 31 December 2013.

The ABI and its members will produce a common definition of what charges have to be disclosed at the outset to pension scheme members by the summer.

The agreement will require disclosure of:

• Total charges at the outset, to a standard definition, across all workplace schemes, including any entry or exit charges
• Total charges taken in the previous year, expressed in pounds to an exact of a rounded up figure
• Previous year’s investment transaction costs

Stephen Gay, director of life, savings and protection at the ABI, said the agreement would provide employees ‘with greater understanding and confidence in the value of saving for their financial needs in later life’.

He added: ‘It is imperative that savers have complete confidence that the industry is open and transparent with them.’

The agreement has been welcomed by pensions minister Steve Webb.

He said: ‘Charges really matter – small differences can have a big impact on a pension pot over time. Automatic-enrolment makes it all the more important that people have access to schemes which offer both transparent and value for money charges,’ he said.

The pension providers who have signed up to the agreement so far are; Aegon, Aviva, AXA, B&CE, Co-operative Insurance, Friends Life, Legal & General, Lloyds Banking Group, LV=, MetLife, Prudential, Royal London, Scottish Life, Standard Life and Zurich.

To find out more about pension charges, read these guides from The Lolly:

• Q&A: pension charges explained
• The truth about the pension fund charges 'scandal'