Labour's pension policy document on charges is "hugely misleading" and ill-timed ahead of the launch of auto-enrolment, says Association of British Insurers
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.”