Watchdog to sniff out poor value pensions

As many as nine million workers will be automatically enrolled into workplace pension schemes in the next five years under Government plans to tackle the pension savings crisis.

The Office of Fair Trading (OFT) has launched a probe to help ensure that the pension schemes will offer savers the best value for money.

The value of annual contributions into pension schemes is expected to soar by around £11bn by 2018. But there are fears that many people will have little previous experience of pensions and there is a danger that smaller firms could bring millions of new investors into older schemes offering poor value.

Joanne Segars, chief executive of the National Association of Pension Funds (NAPF), said that people are often “very suspicious” about pensions, but this needs to change in order to get more saving for their old age.

She said: “Millions of people will get a new workplace pension under the much-needed auto-enrolment reforms and they need to have more confidence in the product. There is no point bringing them into a pension that they do not trust.”

The watchdog’s market study into defined contribution (DC) pension schemes will look at whether competition between providers is tough enough to work in savers’ best interests.

The OFT will consider the size of the pension pot people are likely to end up with, whether there is enough pressure on providers to keep their costs down and how clear their charges are.

The watchdog also wants to discover whether smaller firms are being given enough hel.

Mary Starks, senior director in the OFT’s services, infrastructure and public markets group, said: “It is important that these savers get a good deal.”