Pension fees: Move to create 'pounds and pence' disclosure rules

Pension funds are developing a code of conduct around charging transparency which will see customers told "in pounds and pence" how much of their savings are lost in management charges.

At its annual conference today, the National Association of Pension Funds (NAPF) will announce it is holding a summit on fee transparency with a view to creating simplified disclosure.

According to NAPF consumer research, one in three people will opt out of workplace pensions when auto-enrolment comes into force from 2012, excluding three million from saving.

Of those who will opt out, 26% said it is because they do not trust the industry with their money, whilst 29% said they distrust the government.

The research also suggested 80% of possible future savers want greater transparency about pensions and their costs.

The NAPF's charges summit is based on these concerns, it said. The summit will include consumers, industry leaders, employers and employee groups, and will aim to create a code of practice on fees.

Joanne Segars, NAPF chief executive, said: "We are alarmed so many say they will reject the new deal, and the picture has got worse since the recession.

"There is no point in bringing people into a pension if their savings are going to be eaten away by fees and charges which they cannot understand.

"The pensions industry has to be much more upfront about what it is doing. People need information about their pension in a form they understand.

"That means pounds and pence, not basis points and unit prices."

Segars said greater transparency of charges will lead to better understanding of the cost of pensions, which in turn will create downward pressure on fees.

In August John McFall, chair of the Workplace Retirement Income Commission, said the industry must create a code of conduct on charges. McFall has also recommended a government cap on charges on workplace schemes.

David Pitt Watson, senior adviser at Hermes Pension Management, has repeatedly called for a cap on the charges allowable on a pension scheme used for auto-enrolment.