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Parliament to consider amendments to pensions bill

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The House of Lords this week will examine amendments to The Pensions Bill to provide greater transparency of charges in pension plans.

The Government has warned that a charge of just 1.5% could mean a pension shortfall of almost a quarter of a million pounds over an average working life of 46 years.

Figures released by the Department of Work and Pensions (DWP) last week stated that average annual management charges in pension plans were 0.84% of contributions in 2013. This is down from 0.95% in 2011.

Despite the apparent decrease, some warn that employees may not be aware of the total charges they are incurring.

Tom McPhail, head of pensions research at Hargreaves Lansdown, said: "It is vital that the millions of employees being auto-enrolled into workplace pensions can be confident that they are getting a good deal from their pension company. It is not enough for pension companies to have competitive charges; they have to be seen to have competitive charges."

The move comes after a 2013 Office of Fair Trading report that stated there was “insufficient visibility and comparability of charges” in retirement plans. The House of Lords debate to be held this week will look primarily at defined contribution auto-enrolment schemes, as this is the area that is perceived to be the most complex.

In summer 2013, DWP issued a call for evidence on the subject of auto-enrolment schemes. It is expected to disclose more findings over the coming weeks.

A DWP spokesman said: "A lack of transparency around the true cost of schemes can prevent savers from having value for money. We will outline our proposals to tackle this issue shortly.”