Charges rip-off: the pensions industry puts on its best innocent face
Sometimes the financial services industry resembles those feckless miscreants with a car boot full of swag who are the mainstay of the sorts of fly-on-the-wall police programmes that fill the further reaches of the Freeview spectrum.
We knew there were lots of pension savings in rip-off pension schemes. Providers knew we knew. But having put on their best innocent expressions, they blithely continued pocketing the cash.
Now the snappily named Independent Project Board has put a number on the problem – up to £26 billion of pension savings faces a reduction in yield of more than 1 per cent due to high charges.
These are not all dusty old legacy schemes containing forgotten savings. More than £12 billion is in post-2001 schemes. Nearly half a million people have joined high-charging schemes in the last three years.
It is those with the least who are clobbered most. The majority of the £900 million of savings exposed to charges of more than 3 per cent is held by savers with pots worth less than £10,000.
But in a change to the established police reality show script – instead of the offenders being carted off to face public justice, the report basically waves them on their merry way for another year
None of the offending providers are named. They have been given until the middle of next year to review their data. Plans to improve value for money will have to be in place by the end of December 2015 giving them at least a further 12 months to leech money from savers.
We know that buyers are in a particularly weak position in the pensions market. Schemes tend to be arranged by employers and the details are complex.
The charge cap of 0.75 per cent on default pension funds only kicks in April. It will do nothing to stop those being ripped off now continuing to be ripped off in the future.
With millions of people building up pensions savings for the first time thanks to automatic enrolment, it is vital that savers can trust those who hold their money.
This report further cements the impression that financial services industry will not change by itself. It is up to the government to act – and act quickly.