The drive for transparency in pension charges could lead to occupational scheme advice for employers becoming regulated by the Financial Services Authority, Legal & General says.
The comments come after the National Association of Pension Funds went out to consultation on a code of conduct for defined contribution providers to follow when disclosing their charges to consumers.
One of the code’s proposals is that all pension service providers – including insurers, fund managers and consultants – must distribute a two-page standardised summary of charges to help members compare schemes.
But L&G’s pensions strategy director Adrian Boulding said this could lead to all corporate scheme advice coming under the remit of the FSA. Boulding said: “This [code] will end up with the act of advising an employer on the choice of pension scheme becoming a regulated activity.”
And he said complexities would still remain. He said: “You cannot measure pension charges at a single point in time because different types of charges bite harder at different times in the life of a plan.”
Boulding said the fact the code is voluntary – and could allow members to design their own charge sheets – means providers may create more flattering formats for themselves, adding to the need for FSA-style regulation.
Hargreaves Lansdown’s head of pensions research Tom McPhail said the NAPF is attempting to create an environment where the provision of advice to employers mirrors the disclosure standards expected in FSA-regulated advice to individuals.
“It is a regulatory anomaly that a substantial proportion of pension buying decisions are made by employers, but that sale is not regulated by the FSA in the same way as sales to individuals,” said McPhail. “The NAPF is trying to bring clarity here. A reasonable level of transparency can be achieved.”
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