Transparency Law on Pension Fees will greatly benefit Savers
- Nash legislation would ensure people are told about the impact of charges on their savings
Labour Party Finance spokesperson Ged Nash has today published new legislation that would address the lack of transparency around the fees charged on the management of pensions that will greatly benefit savers trying to understand how much they will lose from their retirement pots.
“Ordinary people are paying extraordinary sums of money from the pension pot they’ve worked hard to fill over time and it’s time they were given some help so they can easily see and understand the fees they are being charged for the management of their savings.
“A pension is often the second most expensive item a person will purchase during their working life after a home, yet understanding the fees and charges is really difficult. For years various reports have highlighted this problem but there has yet to be any real action to address the opaque nature of pension fees.
“The Bill I have published today amends the Pension Act by inserting a new section that would provide information to pension scheme members through a statement on the impact of charges.
“Most pension scheme members will already be receiving a ‘statement of reasonable projection’ in relation to their pension investment. This statement sets out an estimate of the level of benefit which could reasonably be expected to be paid out under the scheme at a specified future date, based on the value of the assets held on behalf of the member at the date of the statement and using prescribed assumptions about future contributions and future investment returns.
“Under my proposed bill, the trustees will be required to give information about the number and amount of charges under the scheme in the next 12 months. These figures must be provided in cash terms, as a percentage of the member’s pension contribution for the following year and as a percentage of the value of the assets held on behalf of the member at the date of the statement.
“The trustees must then set out the anticipated reduction in yield. This is the difference, in cash terms and as a percentage figure, between the level of benefit in the statement of reasonable projection and what that level of benefit would be if no charges were made under the administration of the scheme.
“Finally, the trustees must provide figures showing what the anticipated reduction in yield would be resulting from the cumulative impact of the charges imposed under the scheme and from a variety of prescribed alternative charges. In other words, the scheme member will know what the impact on the final ‘pension pot’ would be if the charges were, say, half a percentage point higher or lower over the lifetime of the scheme.
“Through these changes it would radically transform the information available to savers and ensure they can reliably compare the large number of products on the market, and get the best value for their retirement.
“The impact of charges would have to be provided when signing up to the new pension scheme, and then every year. The Minister for Social Protection would be responsible for making regulations to enforce the bill.
“Since the findings of an independent report on pension charges was published on Monday I have been inundated with stories from the public about how they have struggled to get answers on pension charges, and this bill would provide consumers with more information, and protection for their savings.”
The draft text of the Bill is available here and an explanation of what it does is here: https://www.labour.ie/assets/files/pdf/pensions_transparency_memo.pdf