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Code could help auto comparison

The National Association of Pension Funds says its proposals for a simplified pension charges code of conduct would help small businesses compare different automatic enrolment schemes.

Last week, the NAPF published a consultation paper on a new voluntary charge disclosure regime which it wants the entire pension industry to adopt.

The NAPF believes by putting all pension charges in one place – the “summary of charges” document – and producing a standard, two-page charge guide it would make it easier for small and medium-sized employers to compare the charges of different pension schemes.

The summary of charges document would separately identify any charges that would be payable by the employer, as well as charges payable from the employees’ contributions or invested funds.

The NAPF says the charges guide should be attached to the summary. A key feature of the guide would be a standardised illustration which shows how much an “average” members’ final pension pot is reduced as a result of charges.

The NAPF proposes to illustrate an employee earning £27,000 per year, which is around the national median earnings, and with total pension contributions at the auto-enrolment minimum of 8 per cent of band earnings over five years.

The pension scheme charges would then be input into the standard template for the employer to review.

The consultation paper says: “We envisage that the final code will be published in the summer and adopted by market participants between then and the turn of the year.

“Looking at the staging dates under automatic enrolment, this timetable will ensure the code is in place in advance of the introduction of automatic enrolment for small and medium employers. We feel it is particularly important to focus on the needs of small and medium employers, many of whom will have had little or no engagement with pensions prior to automatic enrolment.”

Which? executive director Richard Lloyd says: “All automatic enrolment pension schemes must offer good value for money. It is important that employers can compare like with like and be able to easily identify the best value scheme for their employees.”

The NAPF says the code, once finalised, would apply to all parties providing services to employers in setting up and administering pension schemes.

This would includes insurance companies providing contract-based pensions and master trusts, multi-employer trust-based schemes such as Nest, fund managers, financial advisers, employee benefit consultants and third-party administrators.

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