The Financial Conduct Authority (FCA) has announced further successes in reducing pension costs for many customers, with reduced charges on over £24.9 billion of assets.
Frontier conducted the original audit of pension scheme charges in 2014 on behalf of the Independent Programme Board (IPB). The IPB was asked to look at legacy schemes that are at risk of being exposed to charges over an equivalent of 1% annual management charge (AMC), and to recommend what actions the new Independent Governance Committees and Trustees (governance bodies) of each pension scheme needs to take. The audit followed from the Office of Fair Trading’s September 2013 study of the Defined Contribution workplace pensions market.
Frontier collected data on fees and charges for over £67bn of assets in 3.5 million pension pots. Frontier’s analysis found that £26 billion of assets were potentially exposed to charges of more than 1%. The FCA set out its expectation that providers of these schemes would ensure that customers are not exposed to high costs and charges that are poor value for money, and that they engage on an on-going basis with their governance bodies to achieve this.
Since then, providers have reduced or restructured charges and the latest update from the FCA means that only £0.9bn still remains exposed to charges above 1%.
Paul Cullum, from Frontier’s financial services team, said “The FCA has delivered real improvements for a large number of customers. This has been achieved, not by price caps, but by requiring providers to identify, examine and justify the value for money that customers receive. At a time when policy makers seem increasingly intent on intervening on prices in different markets, this may be an approach that could be used instead.”
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