It’s been another week when newspaper financial correspondents have been hogging the front pages - with more questions doubts over the role of the Bank of England in lowballing the Libor rate and admissions by HSBC executives that they had failed to prevent money being laundered by drug cartels and terrorists.
And just when we thought bankers couldn’t possibly be usurped as the most unpopular people in Britain, it now seems our pensions fund managers are doing their very best to secure a slice of the public’s wrath.
Today the RSA published our latest Tomorrow’s Investor report in which we conclude that private pension firms are hiding some of the costs they levy on customers' investment funds - including commission, transaction and management fees.
Our researchers found that when they questioned firms, 21 out of a sample of 23 failed to disclose the full investment costs. This means that customers are left unaware that their pension pots are being eroded by charges – sometimes by 40% or more.
The report has attracted huge interest, including an item on the Today programme, Sky News, the front page of the Daily Telegraph as well as articles in Times, Independent, Mail and Express. As well as the coverage, the main message of the report – that our problems would be solved by lower costs combined with a transparent competitive market – has been well received by policy makers and consumer groups (if not, predictably, by the industry).
David Pitt Watson – the report’s author (and Fellow), has been relentlessly pursuing this agenda ever since the RSA’s original ‘citizen juries’ into pension costs in 2008. I’m happy to say it seems his hard work is beginning to pay off with the pensions minister Stephen Webb saying that “If (charges do not come down) we have the power to act and we will”. The Work and Pensions Select Committee has also agreed with many of the RSA findings.
Today’s report also follows an attack on fees charged by independent financial advisers (IFAs) by Labour leader Ed Miliband who suggested a cap should be introduced on pension charges. Our report recommends a different and less restrictive approach – simply that pension funds provide savers with annual statements, like a bank account, revealing the full impact each year on their investments of all charges and costs.
As we expected, there has been rebuttal from the pensions industry, although its spokespeople haven’t questioned the veracity of today’s research. There is one thing for certain however. With the ONS revealing that the percentage of employees who have a work based pension falling below 50. and the proportion of those in private sector final salary scheme dropping to less than one in ten something has to be done and done quickly.
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