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Labour urges pension providers to come clean on charges

by Rachael Revesz on Feb 07, 2013 at 07:54

Labour urges pension providers to come clean on charges

Shadow pensions minister Gregg McClymont has urged pension providers to come clean about their fees to help boost trust in financial services and encourage people to save.

Speaking at the anniversary of the True and Fair Campaign, organised by asset management company SCM Private, McClymont (pictured) said lack of transparency over charges put people off saving.

‘We have a problem where individuals are saving far less than they could and this is bringing the system into disrepute,’ he said. ‘Only one third of employers are saving into a private pension, but private pensions are crucial if people are to have a decent retirement income.’

McClymont’s comments come as SCM Private published a survey of 2,000 investors which found 62% would invest more in pensions, savings and investment products if there was full transparency on fees.

He said progress had been made on transparency of charges over the last year.

‘The Investment Management Association, Association of British Insurers and the National Association of Pension Funds have discussed pension scheme charges, but for full transparency you need simple but comprehensive disclosure of costs incurred at all layers,’ he said. ‘We need much greater clarity than we currently have and I can see no objections to that. But if we think back 12 months ago, the wind of change has started to blow through.’

20 comments so far. Why not have your say?

TheFuture

Feb 07, 2013 at 08:09

Agree that trust needs to be rebuilt but if transparency leads to further cuts in margin to a point where service standards slip then I am unconvinced that the much needed improvement in household savings will be achieved.

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Gareth

Feb 07, 2013 at 08:13

I'm not sure what Mr McClymont’s background & knowledge is, but the main complaints from clients are NOT about charges, it's:

a) The jargon involved and not understanding pension terminology

b) The constant "tinkering" with pensions by politicians, most of which seems designed to reduce or remove any perceived advantages to the client

Make pensions simple and more people will be encouraged to take them out.

This appears to be yet another attempt by a politican to simply get his name in the press rather than any real effort to help.

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Mrhbeats

Feb 07, 2013 at 08:29

I can't really take any politician seriously when they start to talk about transparency.

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Nick H

Feb 07, 2013 at 08:53

The headline should read 'IFAs collectively urge politicians to stop banging on about this to help boost trust in financial services and encourage people to save.

We all disclose charges ad-nauseum and I cant imagine that any client is unaware by the point of transactions. Charges are a fact of life - in all walks of life...

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Boston

Feb 07, 2013 at 08:54

Is this guy for real? How unusual, a politician that hasn't got a clue about what's happening and the state of play. The general public do not buy pensions or savings plans they are (were) sold them. So let's see what to do - I know; let's remove the incentive to sell by cutiing margins; make the jargon even more complicated to understand and the savings gap is closed! QED. Next great idea please. Commission returns???

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Man of Kent

Feb 07, 2013 at 09:13

Agree with Mrhbeats - just another simplistic populist statement for a legion of nodding dogs. I think Labour must have a rota for statements about pension charges. "Go on, Greg, it's your turn".

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Smudger 2

Feb 07, 2013 at 09:32

I think £5 Billion a year in clawed back tax counts as a charge. Its not particularly transparent either.

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John Burchett

Feb 07, 2013 at 09:40

What should be a prerequisite is for all MP's to spend a few months living the life of those pooer people they are trying to encourage to save. They may then understand why they don't and won't, no matter what initiatives are launched by Government.

Charges have nothing to do with why people do not save and surveys have no standing unless you know what questions were asked and tp which socio economic groups.

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Usually found sitting on the fence

Feb 07, 2013 at 09:42

Surely IFAs and RFAs (will RFA catch on for Restricted?) should look at the stat above and be very concerned, apparently 62% would be more inclined to plan for the future if there was transparency on fees... What question did they ask to get to that response? Surely there are far more pressing barriers to breakdown than charges.

Pension provider A charges a flat charge and a tiered annual charge, plus charges for income etc, regardless whether the plan grows or not. Same with the I/RFA and the fund manager, I believe many clients would like to see charges linked to growth, but the downside would be the industry would need to gamble more for better returns...

Pensioner Jones saves all life making sacrifices (small tv, local holidays), gets a nice sizeable pension pot and other investments, but is then suddenly struck down with a need for nursing care and the pot rapidly shrinks to cover costs. Pensioner Smith made few sacrifices (big tv and lots of exotic holidays), has little savings and ends up being fully funded by the state. This is one of the things that determines peoples attitude to saving and this is the sort of thing that the media love to print. How many papers would print about my mum or anyone else's claiming on her bank loan PPI??

The Govt promotes selfish behaviours by their actions, the public are blasted by the media with images and stories about MPs and their wrong doing (didn't one recently lie about being the driver of a car?) and then there is a request for Pension providers to get their house in order... Their focus should be:

1 - Themselves, clean up or clear out

2 - Start working together to plan the UK landscape on a longer term plan rather than the here and now to win the next election

3 - Banks, legislate to bring about required cultural changes, if that's what it takes

4 - Reduce Claims culture, by nurturing a responsibility culture

5 - Stop tinkering with Pensions and pension investment/income rules

Pretty sure we could all come up with a list of things that need to happen in order to breed confidence in financial services, most of which are not necessarily directly linked to financial services.

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Nigel Bracken

Feb 07, 2013 at 10:02

@ Smudger 2 - indeed. What ever happened to Gordon Brown? Is he Greg Mc's puppetmaster?

Decades of political and regulatory incompetence HAVE resulted in lower charged pension investments but less is being saved so the obvious answer is to further reduce charges then - ignoring, as we all know that the contribution level is the key factor - but Gordon will be alright with a generous tax payer funded pension and speaking engagement income etc.

If we insist on having politicians perhaps we should insist they should stick to the great issues of the day, things they know about like gay marriage and party political spats about the european union and leave the rest to professionals!

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Nick H

Feb 07, 2013 at 10:03

I've just heard about a great scheme ....

You pay £80 into a savings plan, and it gets topped up to £100 on day one. Then a professional institution takes just £1 per year to invest and manage it in pursuit of returns. When you reach 55, you can turn on a tap and get out a lump sum amd income....

Sound familiar? Who wouldnt want one of those !!

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Steve Holloway

Feb 07, 2013 at 10:24

It just goes to show that politicians have no brains and are incapable of thinking before going to print or making a statement. There is no mention in his tstatement that the publics lack of trust has been mainly caused by Government present and past and their gross negligence in managing the economy.

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j p

Feb 07, 2013 at 10:57

sadly the only ways to deal with these publicity seeking politicians is via the ballot box, and public embarassment

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Martinifa

Feb 07, 2013 at 11:03

Hmmm, RDR main focus was tranparant charging, or am I wrong. So this confirms from an MP that RDR has not worked.

Only the media and MP's are banging on about charges, as they actually think the consumer cares.

Fact, you could offer it for free, I know an adviser who explained to 200 employees about their new GPP, which the employer was funding at 4% and required 3% of their salary. 12 staff took it up, why because one employee went around telling all of them Pensions are not worth it, they will effect your benefits in later life.

Wake up, the problem is the media and the MP's who see this as an easy way to get themselves in the news and looking like they are doing something by banging on and on. After 20 years of this the consumer actually believes what they have been told.If we had 20 years of telling the consumer pensions funded correctly are the best thing in the world, maybe just maybe more consumers would purchase them.

The consumer on the other hand cannot afford to save in most cases, which is why they do not have pensions, they need to eat and pay the power bills.

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Jonathan Kirby

Feb 07, 2013 at 12:36

What a load of cods-wallop.

Presumably he has never even seen a post Stakeholder era pension quote.

Bid offer spread - none.

Initial charge - none

Loyalty bonus - none

Large fund discount - yes. Put more in we charge you less - explained!

Total expense ratio approx 1.1%.

I am still rankling over the stupidity of those who got cost and charges mixed up when they did the research for Stakeholder.

Q. 'Why don't you pay into a pension'?

A 'Because it costs too much'.

Conclusion - the charges are too high not that the people questioned were struggling to pay all their more immediate bills.

The snag is virtually every politician is there purely for their own self enrichment and glorification, not to serve their constituents so they automatically assume that the whole public must be just like them.

Thank God they aren't and that there are still a lot of decent caring people in the world, if not in Westminster.

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Charles Rickards

Feb 07, 2013 at 13:52

Hopefully Gregg McClymont will be vain enough to read this article with his name attached and consider the comments made, whilst I am sure that he and the rest of the political elite will give no serious thought to the plight of the average future retiree.

Charges are not the primary issue for consumers, rather it is the misguided belief that all pensions are not good value for money. This was yet again brought to light in a conversation I had with a nephew of mine, who is in his works pension, but can't see the point of being hard up now, to be in something his older colleagues tell him is not worth it. I asked him if he intended to stop working when he is much older? To which he replied 'yes!' I asked how he might pay his bills, if he was not earning? And no real surprise, he hadn't thought about it, because it is too far away to worry about.

Just maybe, financial responsibility should be taught in schools as one of life's essentials. So Mr McClymont, how about sticking that on your agenda and making a name for yourself for doing something beneficial!

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BGM

Feb 07, 2013 at 14:07

Maybe the product providers could start including the cost of items the politicians have had a direct influence in, such as the limitation of pension tax relief and the removal of tax credit on ACT. That would be true transparency and people could see how the cost of the meddling of politicians has interfered with their pension, though I am not convinced it would encourage pension saving; quite the reverse I imagine.

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Ted Shaw.

Feb 07, 2013 at 14:17

SO, a member of Parliament talking about transparency and the cost of pensions. Do your homework! Don't take any tax from pension investments and make all pension income up to the MIR tax free!! I write to people all the time about their 'legacy' pensions and get about a 2% response. @Charles Rickard, I agree, educate children about inflation and the state pension amount or make pensions compulsory as they do in Australia.

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Jonathan Kirby

Feb 07, 2013 at 15:04

@ Charles Rickards

They must be monitoring these columns!

New story:

http://citywire.co.uk/new-model-adviser/government-adds-financial-education-to-school-curriculum/a657371?ref=new-model-adviser-latest-news-list

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Charles Rickards

Feb 07, 2013 at 15:18

@ Jonathan - would be nice to think so!

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