There is much to welcome in the results of the Office of Fair Trading’s market study into workplace pensions. They suggest (I would not class them as recommendations given they have simply identified problems and asked DWP to consult on them) more action on high charges in ‘legacy’ schemes, built-in adviser commissions that would be illegal to set up today, and the practice of charging members that have left pension schemes more than those that remain.
I was particularly pleased that they identified the possibility of a single-number disclosure on transaction costs – the difficulty here will be how transaction costs are defined.
There is, however, one area where they have made a firmer recommendation – and unfortunately it is the one area where they have got it badly wrong. The notion of independent governance committees embedded within insurance companies is fanciful, in my opinion, and will lead to merely cosmetic improvements in how contract-based workplace pension schemes (which do not have trustees) are governed.
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Image: Jerome Yewdalll