The National Association of Pension Funds has drafted a code of conduct for workplace pension charges as the industry seeks to increase transparency ahead of automatic enrolment.
The industry trade body is consulting on proposals which would require all charges to be “clearly and accurately” stated in a “summary of charges” document.
The NAPF also wants to introduce a standard two-page guide to help employers compare the effect of charges on the pension pots of “sample” employees and the services offered by the pension arrangement.
The guide would include a standard illustration of the impact of charges on a person’s final pension fund. The illustration would be based on an employee earning £27,000, approximately the national median earnings, with total contributions at the auto-enrolment minimum of 8 per cent of banded earnings.
NAPF chief executive Joanne Segars (pictured) says: “We need to boost faith in pensions, but charges are a big concern for many people and often the information on offer is unclear.
“People need to see what is being charged and why, and in a language they understand. This code could really flush out the detail on charges by making sure that the fine print gets magnified.
“Auto-enrolment is just around the corner and many businesses will be looking at pensions for the first time. This code will help employers make the right pension choice for their staff.”
Association of British Insurers director of life, savings and protection Steve Gay says: “Employers choosing a pension for the first time need support and guidance to understand the impact of charges on their employees’ pension pots, especially where they don’t have professional advice.
“A code could help to achieve this. This consultation will help us test the practicability of the proposals with our members and employers.”