Study to throw light on hidden pension investment charges

From April, pension scheme trustees and Independent Governance Committees (IGCs) must report annually on the level of investment and management charges incurred by members.

The Financial Conduct Authority (FCA) and Department for Work and Pensions (DWP) launched a call for evidence into how to report these in a “standardised, comparable format”.

Christopher Woolard, director of strategy and competition at the FCA, said transaction costs have a direct impact on the value of pension pots. He said: “We want clarity and consistency across the market.”

Pensions minister Steve Webb said savers need confidence their money is “working for them”.

“There is a fear that the dark corners of the investment and pensions industry hold some nasty surprises,” Mr Webb said.

“We have a duty to throw light for the first time on potential hidden charges.”

The Investment Association, which represents UK investment managers, welcomed the study.

Chief executive Daniel Godfrey said: “The call for evidence provides an opportunity for all parties, most importantly scheme decision-makers, to help shape the disclosure regime at a critical time for the UK pensions environment.”

Next month, a charge cap for pension schemes used for auto-enrolment will come into force. This will mean schemes cannot take more than 0.75 per cent of an employee’s savings each year in administration fees. The cap does not currently include investment charges.

Mark Wood, chief executive of JLT Employee Benefits said the cap should “curb some of the excesses of the past”.

However, he added: “This will only be truly effective if regulators ensure that investment houses are not making up for lost fee revenues by levying ‘investment stealth taxes’ elsewhere.”