Nothing to do with platforms for a change…
We were heartened – heartened I say – by the news today that investment providers to pension schemes will be forced to disclose all charges; not just the highly dubious headline Annual Management Charge (AMC). For those unaware, investment funds incur a load of costs over and above those disclosed in the AMC. Some pop up in the Total Expense Ratio (TER), but not transaction charges, which sneak in at the back, unannounced and unwelcome like a fart in a lift.
The very fact that we need legislation to force companies to be transparent on transaction charges in this day and age is in itself quite shocking – but not surprising. All the transparency in the world on scheme charges means nothing if savers don’t understand investment charges.
The financial services industry is awash with complexity, opaque charging structures and hidden fees that leave customers confused and untrusting. Too many of these exist in pensions, and it’s been incredible to watch margin grabs flee from product charging to investment charging over the years. It really has been a masterclass in how to keep screwing investors.
If pension providers and fund managers really want to address the massive pensions gap, the industry must first focus on ‘the trust’ gap. Trust in this industry is nearly non-existent, and that is down to lots of clever industry people making products and investment cleverly complex.
We welcome any move to rebuild trust in the pensions industry. This announcement goes some way towards that. But it’s not enough – savers in group personal pension schemes and individual personal pensions also deserve the same clarity and transparency. We hope they’re next.