Pension providers have made significant progress towards meeting the recommendations of the Independent Project Board (IPB), to reduce cost and charges, according to a new report published today (13 December 2016) by the Financial Conduct Authority (FCA) and the Department for Work and Pensions (DWP).
The IPB was established in response to the Office of Fair Trading’s 2013 market study which found that £30 billion of savers’ funds in defined contributions workplace pensions were at risk of delivering poor value for money.
The IPB recommended that scheme providers put in place plans, by the end of 2015, to reduce fees and charges to provide better value for money. As a result of this work, over a million customers within contract-based and trust-based schemes are now subject to lower charges than before.
A small number of providers have put in place actions that rely on a response from another party, such as individual customers or the trustees of the scheme. Once received, this will improve the overall position across the industry further. Both the FCA and the DWP will continue to work with providers to ensure that customers are not being disadvantaged over the long-term, especially if responses have been slow or low in number.
For 16% of the assets under management in contract-based schemes, and 15% in trust-based schemes, the progress is unsatisfactory or unclear, with customers still at risk of high costs and charges. The FCA and DWP will shortly be contacting these providers and will expect them to explain the reasons behind this and to ensure that savers are being treated fairly.
Richard Harrington, Minister for Pensions, said:
I am pleased that more than a million pension savers will benefit from our push to curb excessive charges in legacy schemes.
Nevertheless, some people are still at risk of high charges, so I shall be seeking assurances from the providers of those schemes, that they will be taking steps to resolve this issue.
Andrew Bailey Chief Executive at the FCA said:
Pension providers look after the savings of millions of customers and it is vital that they provide good value for money. We have seen good progress towards the goals that the IPB laid out but this is not the end of the story. Firms should continue to work to ensure that value for money is being consistently delivered.
There is still more to do so we will be contacting the providers who have not yet taken satisfactory actions to remedy poor value schemes and we expect them to act swiftly to ensure good value for customers.
Findings from the Joint Review
The Office of Fair Trading undertook a market study in 2013 into both contract and trust-based defined contribution workplace pensions. In response to the findings, the Association of British Insurers established an Independent Project Board to oversee an audit of these schemes. The IPB undertook a comprehensive assessment of charges using data from pension providers.
On 1 April 2013 the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority.
The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has 3 operational objectives:
- to secure an appropriate degree of protection for consumers
- to protect and enhance the integrity of the UK financial system
- to promote effective competition in the interests of consumers
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