Unclear investment systems are leaving workers in the dark over the cost, performance and value for money of their pension products, says UNISON today (Wednesday).
In its evidence to the Work and Pensions Select Committee inquiry into pension costs and transparency, UNISON has said more needs to be done to ensure pensions are working in the best interests of workers.
UNISON believes that government legislation needs to be put in place to ensure openness regarding costs and charges, for both defined contribution and defined benefit pensions.
The trade union for public sector workers said statutory duty must be placed on trustees to collect and publish cost data to scheme members, including administration, investment management fees and transaction costs.
A survey, conducted as part of UNISON’s response, revealed that eight in ten (86%) workers have no idea how the money in their pension fund is invested.
The survey – of 921 employees working across the public sector – also found that 85% said their pension fund did not explain the impact that costs and charges have.
The Select Committee isexamining whether workers get value for money from their pensions, understand what they are being charged and why, are aware of the impact of costs, and know where money is invested and how it is performing.
People’s ability to make informed decisions based on information given about cost, and their ability to get good value from their financial advisers will also come under the Committee’s scrutiny.
UNISON national officer for pensions Colin Meech said: “People paying into their pensions are bearing the costs of an unclear and inefficient system while asset managers are profiting.
“No other purchasing decision is made without people knowing the price before they buy something, yet workers are left in the dark when it comes to the cost of their pensions.
“Nobody is setting out to explain pensions to the people paying into them. Costs and charges need to be much clearer. If that happened, current costs would fall and then more money could go back into the hands of workplace savers.”
Notes to editors:
UNISON’s submission references the Netherlands where pension funds are required to submit standard data on fees and costs, which is aggregated and published by the Dutch National Bank. Schemes in the Netherlands have seen investment costs fall by more than a third since this compulsory cost reporting framework came in a year ago.
It also references Australia where defined contribution superannuation funds are required to disclose information on investment fees and costs to members. With assets of about A$2.6trn their workplace savings system has grown into one of the largest in the world and is largely viewed as a success.