Stop rip-off pension fund charges, MPs tell ministers
MINISTERS are doing too little to stop the pensions industry ripping off savers, MPs have warned.
Some firms are making a ‘fat living’ because they are not being forced to reveal all their charges in a simple way, members of the Commons work and pensions committee said.
They called on the government to increase scrutiny by forcing pension funds to make information clearly available to ‘bamboozled’ customers.
and they accused pensions minister guy opperman and Treasury economic secretary John glen of being complacent, saying no part of the industry scored above half marks on transparency.
independent MP Frank Field, who chairs the committee, said: ‘ripping off pension savers could be eliminated. The select committee is calling on the government to shine the searchlights into that part of the financial industry that has settled down to misinforming, mischarging, overcharging and making a fat living off the hard-earned savings of pensioners.
‘government and regulators should not wait for the industry to fail to act voluntarily as they have so many times in the past. it must put the full force of the law behind such changes.’
MPs also criticised City watchdog the Financial Conduct authority (FCa), which has only ten of its 3,700 staff working on a dedicated fraud team, after reports showed around £2billion was lifted from pension schemes by unscrupulous advisers in one year. They said the FCa register of firms that have been banned from giving advice is impossible to understand and should be made clearer. The committee wants to make it easier for savers to see whether they are getting value for money in their pension, by forcing all schemes to issue a document stating the costs and charges.
it found that some pension trustees were making investment decisions when they did not know the scale of the costs they were incurring.
asset managers, who invest the money for pension schemes, are often unwilling to disclose all the costs charged.
in an earlier report on the British Steel pension scheme, the committee found that scheme members were being ‘shamelessly bamboozled’ by advisers and unregulated introducers. in some cases they were being talked into buying unsuitable, high-risk products with large management charges and punitive exit fees.
in 2015, the government capped charges at 0.75 per cent for savers automatically enrolled in defined contribution schemes. But the committee said this does not cover all charges – and urged ministers to review its scope.
Pensions expert Baroness altmann said: ‘Displaying prices clearly for customers should be one of the most basic elements of a product sale, yet in pensions it seems to be an “optional extra”.
‘Currently, firms can decide how to display and structure their charges. This is like shoppers going into a supermarket and seeing similar-looking products on the shelves, but the prices are hidden.’
The FCa said more than 100 of its staff work on pensions issues, although they are not part of the dedicated fraud team.