Let’s be really clear. We welcome anything which makes things easier for employers and employees to understand their pension. Pensions are complex and we must work together to make them simpler.
A single state pension and better practices to inform people of their retirement options are two good examples of initiatives which are in the spirit of making things better for people who save.
The NAPF’s proposed code of practice on pension charges is in this same spirit but we need to work together as an industry to ensure we implement the right changes in a way that works for everyone.
I think we are all in agreement that a standard way of communicating to employers about charges is a useful step forward. There will be differing views on how we achieve this and there is no doubt that it is a challenging task, with so many variations of charges.
Challenging does not mean impossible, though.
It brought a smile to my face to see the proposal that any such communication should be limited to two A4 pages. What we must not do is mistake transparency and simplicity as being one and the same.
The level of transparency is important as there comes a point where the detail is no longer helpful to the consumer. Something might be enormously transparent but in no way simple. This is the same when it comes to pensions. Research in the past has suggested that few people read beyond the first page of any document presented to them.
When it comes to charges, the industry has nothing to hide. Pension charges are very competitive despite some commentators recently suggesting otherwise. Before 2001, charges were numerous and would often total three or four times what they are today. Ten years on, massive strides have been made in efficiency and many providers have achieved the economies of scale necessary to reduce costs to where they are today. Most schemes are priced at less than 1 per cent annual management charge and many less than 0.5 per cent (the broad charge associated with Nest). Charges also continue to reduce through the natural forces of market competition.
Finally, we need to acknowledge the role of the corporate adviser. They already play a prominent part for most employers in the process of selecting a provider, ensuring that the overall proposition is considered – of which the charges are just one element.
2012 heralds the long- awaited introduction of auto-enrolment. It is imperative that whatever we do, people feel better about saving and that they take advantage of what employers offer them.
It is up to us to engender a greater level of trust – anything we can do in this regard is a step forward.
Jamie Jenkins is head of workplace strategy at Standard Life