ABI: Pension charges to be made clearer to UK savers

Monday, 14 January 2013 11:45 AM

Leading pension brands announce charges disclosure agreement

The UK’s leading pension providers, members of the Association of British Insurers, have today announced an agreement to ensure the consistent and straightforward disclosure of pension charges and costs to employees in workplace pension schemes.

The agreement will be implemented by the summer of 2014 for schemes newly established for auto-enrolment, and for all older workplace pension schemes by 31 December 2015. A common definition of all charges to be disclosed at the outset to pension scheme members will be developed in the first half of 2013.

Stephen Gay, Director of Life, Savings & Protection at the ABI comments:

“This agreement is a vital way of providing savers with greater understanding and confidence in the value of saving for their financial needs in later life.”

“The agreement demonstrates the industry’s commitment to improving customer understanding in pensions by disclosing all pension charges and costs more clearly and consistently.  Automatic enrolment into workplace pensions is bringing millions of people into pension savings for the first time. It is imperative that savers have complete confidence that the industry is open and transparent with them.”

Steve Webb, Minister for Pensions, MP comments:

"This is a welcome step in helping customers make decisions about their long-term savings and I hope to see providers across the industry signing up to this agreement.

"Charges really matter –small differences can have a big impact on a pension pot over time. Automatic-enrolment makes it all the more important that people have access to schemes which offer both transparent and value for money charges. The industry must be ambitious in its timescales for achieving greater transparency."

The disclosure agreement requires:

·         Disclosure to employees of total charges at outset, to a standard definition, across contract and trust-based workplace pension schemes, including any entry or exit charges

·         Disclosure of the total charges taken in the previous year. The intention is that this will be expressed in pounds, either the exact amount or a rounded figure in each case, where reasonably practical

·         Disclosure of the previous year’s investment transaction costs (using the IMA’s Guidance).

This agreement has been developed by the ABI and its members in conjunction with a working group consisting of representation from the Financial Services Authority, Investment Management Association, National Association Pension Funds, The Pensions Regulator and Department Work Pensions.  A number of consumer and representative bodies have also been consulted.

The ABI will monitor the agreement and provide regular progress reports.  This will include the number of schemes and proportion of the market where the Agreement has been implemented.

While the initial group of signatories is drawn from the ABI’s membership, consultation will continue on extending this to the broader market of pension provision.

The agreement forms part of on-going ABI work on improving customer experience and transparency in pensions.  This includes the launch in 2012 of the Open Market Option Code, the publication of annuity rates and the industry code on employer pension charges.

Leading pension brands who have signed up to this agreement are:

Aegon
Aviva
Axa
B&CE (The People's Pension)
Co-operative Insurance
Friends Life
Legal & General
Lloyds Banking Group
LV=
MetLife
Prudential
Royal London / Scottish Life
Standard Life
Zurich Assurance Ltd

- ENDS -
Notes for Editors

The agreement is attached together with signatories at the bottom of this document and is available to download from www.abi.org.uk



1.    Enquiries to:
Malcolm Tarling          020 7216 7410 Mobile: 07776 147 667
Linsey White               020 7216 7415 Mobile: 07885 998 011
Adeola Ajayi               020 7216 7521 Mobile: 07725 245284

2.    The ABI is the voice of the UK’s insurance, investment and long-term savings industry. It has over 300 members, which together account for around 90% of premiums in the UK domestic market.

The ABI’s role is to:

-       Be the voice of the UK insurance industry, leading debate and speaking up for insurers.

-       Represent the UK insurance industry to government, regulators and policy makers in the UK, EU and internationally, driving effective public policy and regulation.

-       Advocate high standards of customer service within the industry and provide useful information to the public about insurance.

-       Promote the benefits of insurance to the government, regulators, policy makers and the public.

The UK insurance industry is the third largest in the world and the largest in Europe. It is a vital part of the UK economy, managing investments amounting to 26% of the UK’s net worth and contributing the fourth highest corporation tax of any sector. Employing over 290,000 people in the UK alone, the insurance industry is also one of this country’s major exporters, with 28% of its net premium income coming from overseas business.

Insurance and businesses protect themselves against the everyday risks they face, enabling people to own their own homes, travel overseas, provide for a financially secure future and run businesses. Insurance underpins a healthy and prosperous society, enabling businesses and individuals to thrive, safe in the knowledge that problems can be handled and risks carefully managed. Every day, our members pay out £147 million in benefits to pensioners and long-term savers as well as £60 million in general insurance claims.

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4.    More news and information from the ABI is available on our web site, www.abi.org.uk.
 

Linsey White
Media Relations Officer
Operations Directorate
Linsey.White@abi.org.uk

T: 020 7216 7415
M: 07885 998 011
Follow the ABI on Twitter @BritishInsurers
www.abi.org.uk

Association of British Insurers
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