OFT launches investigation into workplace pension schemes

The OFT has launched a market study to examine whether defined contribution workplace pension schemes are set up to deliver the best value for money for savers.

Alongside the introduction of auto-enrolment, the OFT says it wants to investigate whether competition will work in the best interests of workplace savers to deliver low cost, high quality pension schemes.

The study will focus on value for money and the size of pension pot savers end up with at retirement.

It will look at how pension providers compete with one another and how the market may develop over time and whether there is sufficient pressure on pension providers to keep charges low, plus the extent to which information about charges is made available to savers.

It will also consider whether smaller firms face difficulties in making pension decisions in the interests of their employees and whether they receive appropriate help and advice in setting up and maintaining workplace pension schemes.

The OFT says it will look into barriers to switching between schemes and a potential lack of ongoing employer engagement in setting up and managing pensions.

Senior director in the OFT’s services, infrastructure and public markets group Mary Starks says: “The UK workplace pensions market is set for rapid growth and change over the next six years, in particular with the introduction of automatic enrolment.

“It is important that these savers get a good deal. We want to take a look at the market now to ensure that providers are competing to offer the best possible deals, and that the choices made by employers mean that employees are saving into good pension schemes for their retirement.”

The OFT says it will work closely with the Department of Work and Pensions, The Pensions Regulator and the FSA during the course of its study.

It will also seek input from key players including the National Association of Pension Funds, the Association of British Insurers, pension providers, trade bodies and those that represent employers and employees.

The OFT plans to complete the study by August 2013.

ABI director general Otto Thoresen says: “People rightly need confidence in a system that delivers value for money pensions and works well for employees and employers. ABI members recognise this and are raising standards to meet customer expectations.

“Pension charges have fallen to their lowest level, and industry initiatives are set to ensure charges and costs are disclosed clearly in a consistent format, and that people nearing retirement get more help to get the best pension deal.

Aegon head of regulatory strategy Steven Cameron says: “We are pleased to see OFT will also examine if smaller firms receive help and advice. Advisers play a key role and we have concerns regulation is making it harder for them to help such employers. Advisers also encourage greater employer engagement which is particularly key as we progress with auto enrolment.”

Source of article: Money Marketing; 17.1.2013

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