Labour pension charges report 'hugely misleading' - ABI

by Jenna Towler and Rachel Dalton

More from this author

16 Jul 2012

  • Comments
Ed Miliband

LABOUR'S LATEST POLICY document on pension charges is "hugely misleading" and ill-timed ahead of the launch of auto-enrolment, according to the Association of British Insurers.

A report, drafted by shadow work and pensions secretary Liam Byrne and backed by Ed Miliband (pictured) last week, claimed that in a worst-case scenario half of a saver's pension pot could be swallowed up by charges, Accountancy Age's sister publication Professional Pensions reports.

However, director-general of the ABI Otto Thoresen said the calculations in the document had a 'back of an envelope' feel.

He said: “This is a disappointing and hugely misleading report from Labour. Most private pensions work well for their customers, charge fairly and give clear information about how they work.

“Charges have been falling steadily for the last decade and the average annual management charge is now just 0.77%."

He claimed the extra costs Labour highlighted were transaction costs that include stamp duty and only related to particular types of actively managed funds.

Thoresen added: "If Labour is concerned about the costs of pension schemes, it should commit a future Labour government to lowering this stamp duty. The fact remains that the most important factor in how much a pension pot accumulates is how much is contributed to it, not the charges.

“We are about to begin the most important pension reforms since the 1940s, reforms developed by a Labour government in partnership with a fully supportive pensions industry.

"It is hugely frustrating that just as we try to begin to sign up workers to the pension savings schemes they need, Ed Miliband has decided to undermine confidence in pension saving by this highly selective and one-sided analysis."

Labour's paper included a host of proposals which have been better received by the industry than its comments on charges – many of which have already been highlighted as problem areas.

The proposals include the removal of the contribution limits and transfer ban on the National Employment Savings Trust; the creation of a nationalised annuity clearing house; and an amnesty on exit penalties from pension plans.

Hargreaves Lansdown head of pensions research Tom McPhail said: "The pensions industry needs to regain investors' confidence and demonstrate that it can meet their expectations.

"There should be greater simplicity and transparency in the disclosure of pension charges."

Visitor comments

blog comments powered by Disqus
display:none

Add your comment

We won't publish your address


By submitting a comment you agree to abide by our Terms & Conditions

Your comment will be moderated before publication

Submit
  • Send

Newsletters

Get the latest financial news sent directly to your inbox

  • Best Practice
  • Business
  • Daily Newsletter
  • Essentials

Careers

Search for jobs
Click to search our database of all the latest accountancy roles

Create a profile
Click to set up your profile and let the best recruiters find you

Jobs by email
Sign up to receive regular updates with the latest roles suitable for you

Briefings

budget-management

Why budgeting fails: One management system is not enough

If budgeting is to have any value at all, it needs a radical overhaul. In today's dynamic marketplace, budgeting can no longer serve as a company's only management system; it must integrate with and support dedicated strategy management systems, process improvement systems, and the like. In this paper, Professor Peter Horvath and Dr Ralf Sauter present what's wrong with the current approach to budgeting and how to fix it.

cchcover

iXBRL: Taking stock. Looking forward

In this white paper CCH provide checklists to help accountants and finance professionals both in practice and in business examine these issues and make plans. Also includes a case study of a large commercial organisation working through the first year of mandatory iXBRL filing.