The Work and Pensions Committee has launched an inquiry into the transparency around pension charges, investment strategy and performance to consumers.
The inquiry, launched today, 3 August, has asked the industry to submit their views on eight questions, including; do higher-cost providers deliver a higher performance; how can savers engage more with their savings and whether customers get value for money from financial advisers.
The inquiry also asks whether the government is doing enough to ensure value for money; how important is transparency to savers and if there are barriers to customers going elsewhere if they are unhappy with their providers’ costs and investment strategy.
In March, the Financial Conduct Authority launched a consultation paper which sought the views of the pensions industry on potential changes to charging structures and a possible ban on contingent charging.
The FCA is set to make a statement on pension transfers in the Autumn.
Furthermore, the inquiry follows the Committee’s recent inquiry into pension freedom and choice, which found an “inherent conflict of interests” over the use on contingent charging.
The Committee said: “Following on from that work, this new inquiry focuses on whether the pensions industry provides sufficient transparency around charges, investment strategy and performance to consumers.”
The inquiry has been welcomed by the industry, as it will “ensure people get value for money for their pension savings, understand what they are being charged and how they can get good value service from financial advisers”, according to Royal London pension specialist, Helen Morrissey.
Pensions and Lifetime Savings Association director of policy and research, Nigel Peaple, added: “In order to improve consumer confidence in pensions, and understanding of these complex products, it’s absolutely vital that any fees and charges are transparent for savers.
“Today’s inquiry is an important step in this process and follows the work the PLSA has done with the Institutional Disclosure Working Group, FCA and the Investment Association and in order to make costs clearer to both savers and pension scheme trustees.”
Despite this, Aegon head of pensions Kate Smith believes that transparency could be a “double-edged sword” that could put people off more effective engagement with their savings.
“It is important to get the balance and timing right in order to encourage engagement. Given auto-enrolment and the rise of pension freedoms, individuals must be better equipped to make an informed decision about pension saving in order to feel that they are both empowered and getting value for money for their savings,” she said.
The deadline for replying to the inquiry is 3 September 2018.