People’s calls for VfM framework to apply to retail sector
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Pension provider the People’s Partnership is calling on the Financial Conduct Authority to include retail firms in the remit of value for money rules that have been outlined for workplace providers, and warns pensions dashboards could exacerbate the issue of transfer losses.
The pension provider is calling on the Financial Conduct Authority to expand proposed value for money rules on workplace DC schemes, which would compare investment performance and ban poor performers from taking on new business, to the retail sector.
The pension provider is calling on the Financial Conduct Authority to expand proposed value for money rules on workplace DC schemes, which would compare investment performance and ban poor performers from taking on new business, to the retail sector.
“We believe this framework should apply to the whole market, rather than just workplace pensions,” its chief executive Patrick Heath-Lay said.
Pension savers could lose as much as £1.2bn a year from transferring to higher charging retail arrangements, the master trust provider suggested. It projects market activity for unadvised defined contribution transfers has increased by more than 50% in four years, driving predicted losses up from £792m in 2020 to £1.2bn in 2023. Pension pots at retirement could be up to 20% lower as a result, it claimed, potentially forcing people to work longer.
The provider of the £25bn master trust the People’s Pension has launched a new Pension Transfers Loss Index which tracks switching movements from workplace pensions, subject to a 0.75% charge cap on the default fund, to higher charging retail schemes.
People’s Partnership argued transfer losses could be exacerbated by pensions dashboards going live, which is expected to happen in the next few years.
Heath-Lay said the potential losses were “incredibly worrying”, adding: “Given market activity around transfers is escalating, this could easily cost consumers billions a year more once commercial pension dashboards are introduced.”
People’s Partnership argued transfer losses could be exacerbated by pensions dashboards going live, which is expected to happen in the next few years.
Heath-Lay said the potential losses were “incredibly worrying”, adding: “Given market activity around transfers is escalating, this could easily cost consumers billions a year more once commercial pension dashboards are introduced.”
The master trust wants providers to have to disclose key information to consumers in a prominent place to make sure they understand charges before moving their pension. It found last year that nearly three-quarters (72%) of 1,000 people who had transferred a DC pension without advice did not know exactly what fees their new provider applies, and 11% did not know there were any charges or fees on their pension.
People’s itself applies a flat 0.5% management charge and operates a complex system of member rebates, which vary by pot size and number of days in a ‘rebate period’ among others.
The previous government planned to introduce requirements on workplace DC schemes to report their net performance and costs by 2027 and compare their data against competitor schemes, with poor performers barred from taking on new business. The Labour government elected this month is expected to continue along the same lines. It has included value for money reforms in a new pension schemes bill announced last week and has in the past said it would give the regulator the power to consolidate DC schemes.
Should the value for money framework encompass retail products?
