interactive investor urges FCA to take action to ensure greater transparency for UK savers.
In response to the FCA’s value-for-money in pensions consultation (CP20/9), interactive investor, the UK’s second largest direct to consumer investment platform, has warned a lack of transparency in percentage-based workplace personal pension administration fees is leaving UK savers in the dark.
interactive investor has called on the FCA to encourage workplace personal pension scheme Investment Governance Committees (IGCs) to offer better comparisons. At present, FCA rules mean IGCs need only compare schemes with peers in the workplace personal pension space.
interactive investor believe comparisons should be made with a reasonable number of schemes from the wider pension market, including the more modern Self-Invested Personal Pension (SIPP) schemes that can potentially offer more value and choice.
Richard Wilson, Chief Executive, interactive investor, says: “It’s no surprise that four of the five largest transfers into the interactive investor SIPP come from the big life companies – Aviva, Scottish Widows, Standard Life and Aegon - typically old workplace pensions that cost a fortune. Despite their best efforts, customers eventually figure it out, and vote with their feet – but most people are completely in the dark when it comes to comparing pension products.
“In a world of pension freedoms, it’s ironic that the FCA put investment options into separate boxes. Workplace pensions should not be viewed in isolation when assessing value for money. It restricts choice, freedom and competition.”
The platform has also expressed concerns that the FCA’s charge cap on workplace personal pension administration fees only considers a percent of the pension value, and therefore does not recognise the fixed cost of administering a pension versus the variable cost of investment fees. interactive investor has called for comparisons to be made that allows savers to see how fees can change over time as their investments grow, and at different levels of pension value.
Percentage-based charges mean that as your savings grow, so do the fees. interactive investor believes this does not add up. The amount of work required to administer the pension remains constant, regardless of the sum of your pot.
Richard Wilson continues: “Then there’s percentage fees, which the FCA know that people don’t understand: yet it is a principle that still underpins most investment companies’ charging structures. You may now see a pounds and pence comparison on your annual statement, but it won’t tell you the impact these charges will have over time. If my gym told me I had to pay more cash as I got fitter, I’d tell them to jog on. Yet millions of savers are expected to pay a premium on their future financial health. Come on FCA. Customers should not be expected to put up with this sort of treatment, there needs to be greater transparency around these fees and the regulator has the power to ensure this.”
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