The agreement will be implemented by the summer of 2014 for schemes newly established for auto-enrolment, and for all older workplace pension schemes by 31 December 2015. A common definition of all charges to be disclosed at the outset to pension scheme members will be developed in the first half of 2013.
Stephen Gay, Director of Life, Savings & Protection at the ABI comments:
"This agreement is a vital way of providing savers with greater understanding and confidence in the value of saving for their financial needs in later life."
"The agreement demonstrates the industry's commitment to improving customer understanding in pensions by disclosing all pension charges and costs more clearly and consistently. Automatic enrolment into workplace pensions is bringing millions of people into pension savings for the first time. It is imperative that savers have complete confidence that the industry is open and transparent with them."
Steve Webb, Minister for Pensions, MP comments:
"This is a welcome step in helping customers make decisions about their long-term savings and I hope to see providers across the industry signing up to this agreement.
"Charges really matter -small differences can have a big impact on a pension pot over time. Automatic-enrolment makes it all the more important that people have access to schemes which offer both transparent and value for money charges. The industry must be ambitious in its timescales for achieving greater transparency."
The disclosure agreement requires:
- Disclosure to employees of total charges at outset, to a standard definition, across contract and trust-based workplace pension schemes, including any entry or exit charges
- Disclosure of the total charges taken in the previous year. The intention is that this will be expressed in pounds, either the exact amount or a rounded figure in each case, where reasonably practical
- Disclosure of the previous year's investment transaction costs (using the IMA's Guidance).
This agreement has been developed by the ABI and its members in conjunction with a working group consisting of representation from the Financial Services Authority, Investment Management Association, National Association Pension Funds, The Pensions Regulator and Department Work Pensions. A number of consumer and representative bodies have also been consulted.
The ABI will monitor the agreement and provide regular progress reports. This will include the number of schemes and proportion of the market where the Agreement has been implemented.
While the initial group of signatories is drawn from the ABI's membership, consultation will continue on extending this to the broader market of pension provision.
The agreement forms part of on-going ABI work on improving customer experience and transparency in pensions. This includes the launch in 2012 of the Open Market Option Code, the publication of annuity rates and the industry code on employer pension charges.
Leading pension brands who have signed up to this agreement are:
- Aegon
- Aviva
- Axa
- B&CE (The People's Pension)
- Co-operative Insurance
- Friends Life
- Legal & General
- Lloyds Banking Group
- LV=
- MetLife
- Prudential
- Royal London / Scottish Life
- Standard Life
- Zurich Assurance Ltd
