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More guidance needed on Pensions Costs, say PwC

Pension providers should be more open with the cost of schemes so people can make easy comparisons when choosing between them says PwC.

In a series of recommendations to the Work and Pensions Committee, PwC recommends that a statement of total scheme charges, outlining the total investment charges for different funds and a breakdown revealing any hidden costs would help to build consumer confidence.

Recent research by PwC indicates that defined contribution pension incomes have dropped by 30% in the last 3 years. The Government is currently conducting an enquiry into governance and best practice in workplace pensions, ahead of the introduction of automatic pension scheme enrolment later this year.

Richard Giles, pensions director at PwC, said: “Individuals are inundated with choices around whether to take a pension, and if so what type, how much to invest and where.

“These decisions are even harder if you can’t make straight comparisons between different products and providers, you never feel you know everything you need to know.

“Impossible decisions now as they start investing can put the next generation of savers off pensions for ever.”

PwC have also suggested the introduction of a series of steps, including questioning an individual on their attitude to risk, and the provision of a range of funds to match their risk profile. The Government should consider regulation to ensure that all schemes where investment decisions are taken by the provider have a default fund.

Individuals also need to be given more assistance if they wish to convert to an annuity, as it is “not acceptable for someone approaching retirement to simply be provided with a pack of information, bearing in mind this is one of the biggest financial decisions an individual will make in their lifetime.”

All parties involved in the provision of pensions need to fully understand their responsibilities, and PwC believe that some form of mandatory qualification or training may be worth considering.

Saq Hussain, defined contribution pensions specialist at PwC, added: “Better governance may go some way to restoring confidence in pensions but whether it will be enough to ensure people save sufficiently for their retirement is another issue.

“Alternative types of pension, as suggested recently by the Pensions Minister, deserve consideration but will depend on the support they garner from employers.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .