Widows warns against more pension cost disclosure

Scottish Widows has warned against the UK government’s proposals to force pension providers to include costs and charges in members’ annual statements.

Last month the UK’s Department for Work and Pensions published its consultation ‘Simpler annual benefit statements for workplace pensions’ –which would include adding specific information on charges and transaction costs in annual statements.

“Although we understand the motivation of Government to disclose product charges, the benefits of disclosing transaction charges are less clear and could be at odds with the desire for simpler and shorter annual statements,” said Pete Glancy, head of policy at Scottish Widows.

“We recently modernised and simplified annual statements across our entire suite of pension products, and we believe that any changes are likely to be an extensive and relatively costly undertaking for providers, at a time when other mandatory changes are stretching the resources and budgets of the industry.

“Advances in technology present opportunities to advance customer engagement and customer outcomes to a potentially greater extent than the proposed changes to annual statements.

“If Government concludes that there is sufficient value in progressing with this reform, it’s likely that comprehensive adoption of new principles or a new format will only be achieved through a regulatory or legislative requirement.”

The UK government is pressing for shorter pension statements in plain English.

Glancy added: “We are supportive of this initiative as it promotes simplicity and consistency with the ambition of presenting pension information in a format which a typical member of the public would find intuitive and engaging.

“We feel strongly that for the proposed approach to be effective, it needs to apply consistently and comprehensively across all types of defined contribution pension products including trust based, contract based, workplace pensions, personal pensions and self-invested personal pensions (SIPPs).

“Although defined benefit schemes are a very different entity, there should also be attempts to apply the same principles.

“However, the benefits of simpler and more consistent benefit statements will only be felt if each of the pension pots accumulated by customers over their working lives discloses information in a way that is recognisably consistent.

“To achieve this, we believe that a principles-based approach should be mandated through means which cover all types of workplace pension and also extending to individual pensions and SIPPs …”