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ABI verdict on the OFT study into workplace pensions

The ABI today issued a press statement on the publication of the OFT market study into workplace pensions.

Otto Thoresen, Director General, has also blogged in reaction to the OFT announcement.

ABI verdict

We agree with the OFT that it is vital with auto-enrolment being successfully implemented that consumers have confidence that they are getting value for money pensions.

The section of the market identified by the OFT as potentially having charges that do not represent good value for money accounts for around 10% of the nearly £300 billion worth of assets managed by the industry. We agree with the OFT that it is important to review charges to ensure they offer value for money for today’s savers and employers. This is why the pensions industry has committed to work with the OFT to review these schemes and ensure that charges offer good value for money in today’s environment.

Pre-2001 schemes

Much of the OFT report raises questions about pre-2001 schemes and it is important to remember that most of these were designed for an era before auto enrolment and pension reform. We are keen to work with the OFT to ensure that all schemes are delivering value for money. These schemes account for around 10% of the defined contribution (DC) schemes in force.

Independent Governance Committees

On 30 August 2013, Otto Thoresen sent a letter to Clive Maxwell, Chief Executive of the OFT setting out commitments on establishing independent governance committees and implementing an audit of the value for money in legacy workplace pension schemes. Read the full letter here (pdf 720kB).

We agree that greater confidence in the governance of DC schemes is an important part of building confidence in workplace pension saving. We have today confirmed that pension companies will, by mid-2014, set up Independent Governance Committees to oversee value for money of workplace pensions. 

Higher contributions

The industry must build on auto-enrolment and the reforms announced today to make the case for higher contributions into pension saving. While charges matter, how much is contributed into a pension scheme is the single biggest factor in how good the eventual retirement income is.

Rising life expectancy and lower interest rates on savings make this more important than ever. This is why we have started a debate on how to reform the  current pensions tax relief system with cross-party support to be as effective as possible in encouraging contributions into pension saving.

Last updated 01/07/2016