Labour shadow pensions minister Gregg McClymont has written to the Office of Fair Trading raising concerns proposed reforms to workplace pensions will not provide adequate protection for savers.
The OFT’s report on workplace pensions, published in September, made a series of recommendations to ensure members receive good value for money from defined contribution schemes.
In a letter to OFT director Ed Smith, seen by Money Marketing, McClymont criticised proposals to create independent governance committees for contract-based schemes.
He says: “The board of the contract-based schemes will appoint the ‘independent’ members of the governance committee.
“The board’s duty to ‘comply or explain’ will be to a committee which it has appointed and whose future re-appointment will be dependent on their reputation as being compliant with the board’s wishes.
“The board could legitimately explain that maximising profits made it regrettably infeasible to act in the savers’ interest.”
McClymont also argues against the OFT’s proposal to disclose transaction costs to trustees and governance committees.
He says: “A necessary consequence of such an approach is it will not be possible for either savers’ or third parties on behalf of savers to monitor the effectiveness of the people supposedly appointed to represent their interests.”
Finally, McClymont says a planned audit of schemes with annual management charges over 1 per cent will not be effective due to a lack of uniform disclosure standards and no mechanism to ensure members in poor value schemes are transferred into good ones.
Informed Choice managing director Martin Bamford says: “These are valid concerns which need to be addressed by the Government and providers as a matter of urgency.”