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NAPF proposes simplified pension charges code

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.”

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Adrian Boulding 16th May 2012 at 8:35 am

    Good to see this effort, but we need to get employers to understand that pension prices are more complicated than supermarket prices. You can’t measure the price of a pension at a single point of time. The scheme’s charges will affect different members in different ways as their different careers unfold. Employers will still need help and advice to find the right scheme for their workforce.

  2. We do need to have transparency but this is just adding yet another layer of paperwork that is not necessary. Given that anyone not on £27000pa the example to be quoted is a nonsense. Add this to the fact most employers of smaller companies will only be doing this because they have to, dont really care so the charges should be explained to the individual members based on specifics of their own “pot” it makes no sense at all unless they intend to make the employer liable for the suitability of the any non NEST. That aside If an IFA cannot explain the chrages in a way the employer can understand on the current illustration system then one would need to question if they are fit to be advising in that market place.

  3. So which provider(s) are not being up front and transparent with their charges for new and legacy business ? This all seems a tad unneccesary !!!

  4. Employers will have more concerns about where they are going to find 3% off their salary roll and tell their employees they have to find 4% to fund autoenrolment before they even bother to understand the nuts and bolts of this “perfect storm”.

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