Nick Salter, President-elect, IFoA, comments on the pension charges cap consultation

However, it is worth remembering that  they are one of many factors which need to be considered when assessing the quality of a pension scheme. These factors include:

• customer service;
• governance; and
• investment strategy

and it does not follow that cheapest is best. 

In September the OFT published its Defined contribution workplace pension market study which considered charge caps but concluded that ‘charge caps can create a risk of unintended consequences...Set too high a cap can become a target for providers. Set too low a cap can create incentives for providers to provide lower quality and/or impose less visible charges elsewhere.’ 

The IFoA agrees with the OFT on this point and in addition to this consultation supports measures that will improve transparency of charges, facilitating better comparison and switching, with a focus on outcomes as well as cost.

To be able to compare pension schemes on a level charging basis will be a considerable step forward for consumers and scheme members and the IFoA would like to see consideration given to improving pension portability.

To be able to consolidate and move your pension between providers would result in better outcomes for people and the IFoA will continue to consider how the portability of pensions can be improved because it is outcomes that really count.”