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NAPF set to scale back pension charges disclosure plans

The National Association of Pension Funds is set to scale back plans to force insurers to provide employers with a standard illustration of the impact of charges on an employee’s pension pot.

A draft copy of the NAPF’s code of conduct on charges transparency, seen by Money Marketing, revises the requirement so the standard illustration only needs to be produced if the provider is dealing directly with the employer.

Where an adviser is involved, the draft code says FSA rules governing how illustrations on the effect of charges are generated should be followed.

In May, the NAPF consulted on the code, which is designed to increase the transparency of charges ahead of automatic enrolment.

The consultation, developed with the Association of British Insurers and other industry stakeholders, included a controversial proposal to force providers to issue a standard illustration showing the impact of charges on a sample individual earning £27,000 a year who contributes 8 per cent of their salary into a pension over five years.

The plans were attacked by Standard Life head of pensions policy John Lawson, who suggested advisers and providers already comply with FSA rules which require more accurate charges disclosure than those proposed by the NAPF.

The draft code says: “It is important that employers are able to understand the effect of charges on the pension pots of their workers.

“The code therefore requires that the organisation making the arrangement with the employer (this will normally be the adviser if there is one and the pension provider if there is not) should make available illustrations that show the percentage by which the final pension pot is reduced by the effect of charges.

“The FSA have laid down standard rules governing the basis on which illustrations of the effect of charges should be generated. Under this code providers and advisers should follow those unless it would be misleading to do so.

“Providers who are marketing direct to employers without an adviser should provide alongside their ‘summary of charges’ a sample illustration of the effect of their charges.”

An NAPF spokesman says: “We are considering all the feedback we received during the consultation as we develop the final code. Our aim is still to develop a code that allows employers to compare charges, whether they are dealing with a provider, adviser or consultant. And we want to do so in a way that is meaningful to employers.”

The draft code also urges providers and advisers “where possible” to use web-based tools to tailor an illustration showing the effect of charges to the profile of the workforce of a given employer.

In addition, the draft code excludes trading costs from the proposed disclosure requirements, instead suggesting a summary of charges document should signpost employers to the Investment Management Association’s code of conduct on transaction costs.


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