(November 2011) — Businesses and their staff need much clearer information about pension fees and charges if upcoming plans to automatically enroll them in a pension are to work, the United Kingdom’s National Association of Pension Funds (NAPF) has asserted as industry leaders, consumer groups, employer bodies, and employee groups attended a summit on costs and charges.
“It was good to get everybody round the table to start tackling this issue. People are worried about pensions and the gobbledegook that often ends up in their annual statements is a huge turn-off,” Joanne Segars, NAPF Chief Executive, said in a statement following the summit on pension charges. “The language around pensions has to change. People need information that is useful to them and that they can understand. That means pounds and pence, not a string of basis points and subcharges that would baffle an accountant.”
She continued: “Greater transparency about charges will empower people to get more engaged with their pensions. And while charges affect the millions who already have a pension, it’s especially important that we do not scare away the pension newbies who get automatically enrolled,” adding that since many employers will be picking a pension for the first time for their staff, NAPF must help them make the right choice.
Up to ten million people will be affected by the UK Government’s plans to begin automatically enrolling all workers into a workplace pension from next year.
The NAPF asserted that the current approach to charges is overly complex, making it difficult for savers to see how much they are paying. A November report released by NAPF titled “Making Pension Charges Clearer” asserted that auto-enrollment will not work without clear and transparent charges from pension schemes. The NAPF warned that charges must be in “plain English” so that people don’t “lose faith” and opt-out from their pension scheme.
Discussing the potential issues and problems with the current system, the report stated: “There is no clear universal requirement for charges to be disclosed to the employer at the point they are choosing a pension scheme for the workforce. While charges are commonly disclosed, the lack of any requirement or specification as to how they are shown leaves room for employers to make poor choices. This issue is particularly acute given that, following the introduction of auto-enrollment, tens of thousands of employers will be choosing a pension for their staff (many for the first time). “
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