Pension charges need to be made simple and transparent to ensure employees do not opt out of auto-enrolment, according to Jonathan Lipkin, director of public policy at the Investment Management Association (IMA).
Lipkin (pictured) said providers must express charges in a more consistent way to help employees understand what they are paying and not put them off engaging with pensions.
‘There must be meaningful transparency and consistency in the way these charges are made,’ he said. ‘We have to move away from arguing about complications.’
Speaking at the Westminster Employment Forum auto-enrolment conference, Lipkin said there was a risk the government was relying on employees’ inertia to make auto-enrolment a success, and that more needed to be done to make pensions better understood.
His views were supported by Hari Mann, director of the Tomorrow’s Investor programme at the Royal Society of Arts, who said: ‘Complexity is what turns people off saving, people don’t understand what they’re being charged and what the cost is going to be.’
Mann and Lipkin agreed that the government should put the onus on employers to educate scheme members about auto-enrolment and the charges involved.
Jamie Clark, Scottish Life business development manager, said the government had made a good start to boosting public awareness of pension reform, but it still needed to inform consumers about minimum contributions and the importance of financial advice.
‘The 8% minimum [contribution] rate will eventually be understood and should, [in fact] must, increase,’ he said.
‘When it comes to advice, someone has to pay for it and as long as the scheme delivers, consumers will be satisfied.’