The Work and Pensions Committee (WPC) has launched an inquiry into whether the pensions industry provides sufficient transparency around charges, investment strategy and performance to consumers.
The committee’s recently completed inquiry into pension freedom and choice examined ways to ensure that people saving for their pensions are equipped to make well-informed choices, and are well served by the pensions marketplace.
Another of its reports, on the British Steel Pension report, found that scheme members were “shamelessly bamboozled” by advisers and unregulated introducers into signing up to ongoing adviser fees and unsuitable pension products and investments, characterised by high investment risk, high management charges and punitive exit fees.
The committee concluded that the use of contingent charging (no transfer no fee) by defined benefit transfer advisers gives rise to an “inherent conflict of interest” and recommended that the Financial Conduct Authority (FCA) ban the use of contingent fee models for defined benefit transfer advice.
In March this year, the FCA published a consultation paper which among other things seeks views on potential changes to adviser charging structures, including a possible ban on contingent charging. The consultation will result in an FCA policy statement on pension transfers in Autumn 2018.
Following on from that work, the WPC said this new inquiry focuses on whether the pensions industry provides sufficient transparency around charges, investment strategy and performance to consumers. It will examine whether enough is being done to ensure individuals:
• Get value for money for their pension savings;
• Understand what they are being charged and why;
• Understand the short and long-term impact of costs on retirement outcomes;
• Can see how their money is being invested and how their investments are performing;
• Are engaged enough to use information about costs and investments to make informed choices about their pension savings;
• Get good-value, impartial service from financial advisers.
The call for evidence is open until September 3 2018 and can be submitted to the committee here.