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Industry Publishes Joint Code On Pension Charges

A new joint industry Code of Conduct for disclosing information to employers on the charges made on workplace pensions has been published by a group of pensions experts.

The Code enables, for the first time, the consistent disclosure of charges and investment costs across the workplace pensions landscape.

The Code specifies that all charges are clearly and accurately stated in writing, and that employers receive a standard template summarising the pension charges levied and the corresponding services. The Code also says that employers must be able to see examples of how different levels of charges and charging structures could affect the pension pots of their employees, either through a document or a dedicated web tool.

The Code has been developed by a working group made up of trade, consumer and industry organisations, and pension providers.

It is endorsed by the National Association of Pension Funds (NAPF) and the Association of British Insurers (ABI), in association with the Investment Management Association (IMA) and the Society of Pension Consultants (SPC). These organisations encourage their members and other participants in the pensions market to follow the practices set out by the Code.

It is intended to apply to all parties providing services to employers in setting up and administering pension schemes for auto-enrolment, including insurance companies, trust-based pension schemes, financial advisers, and any other professionals offering paid advice.

The Code will come into effect in two stages. The first stage begins on 1 January 2013 when the Code should be used as a guide for best practice. The second stage starts one month after the launch of the dedicated web tool, which is expected to be available from 1 April 2013 and is being produced by the ABI. During this stage all the provisions of the Code will apply.

Joanne Segars, Chief Executive of the NAPF, said:

“Auto-enrolment will help get millions of workers saving for their old age, but it will only truly succeed if people join a pension that offers good value for money, and if they then stick with it. Charges are a big concern for many people, and this code will help put a spotlight on the fine print.

“Employers need to be able to see more clearly what is being charged and why. They will then be more likely to pick the best pension for their staff. The code sets out a template for explaining charges that will make it easier to compare the cost of pension A with pension B.”

Steve Gay, Director of Life, Savings & Protection, at the ABI, said:

The aim of auto-enrolment is to create a retirement saving habit amongst millions of consumers, so it is extremely important that we raise confidence in pensions through transparency and value for money.

“The new code will allow employers to make a better choice of pension scheme by providing them with clear and consistent information on charges, costs and services. Pension charges have reduced dramatically in recent years but we need to ensure that information is freely available to employers in a format that is concise and meaningful, and helps them to make the right decisions.”

Jonathan Lipkin, Associate Director of Pensions and Research at the IMA, said:

“The IMA believes that demonstrable consistency of charges and costs disclosure is essential. This code provides a template that will apply across the pensions market, and we welcome the progress made over the past twelve months. But this is the beginning of the road. Much more has to be done to ensure that scheme members themselves feel greater confidence in DC schemes, whether trust-based or contract-based. This means an emphasis on overall governance as much as disclosure. We look forward to working with regulators and other stakeholders in taking this forward.”

Roger Mattingly, President of the SPC, said:

"It is important to ensure that charges are transparent, comparable and fair, and we support this initiative to address this.

“There is welcome recognition that employers' decisions should be driven by value, not just cost. A ‘race to the bottom’ on charges would be fraught with danger for members. This needs to be kept firmly in view when the code comes into operation.


“We also welcome the acceptance that the code cannot be applied mechanistically as a one size fits all template. It will be less relevant in some situations than others, particularly in cases of existing client, adviser, or provider relationships."


Last updated 01/07/2016