Fund managers are dishonest about the fees they charge investors and are ‘scalping’ hundreds of millions of pounds off retirement savings and investments, claims a British MP.
Tonbridge MO Tom Tugendhat is calling for new laws to make the investment industry reveal their charges so investors can make a choice of where to put their money.
He claims that financial providers and investment funds take small amounts from each transaction as fees and charges and that over time, these can add up to a third of the value of a pension fund.
These fees include set up costs; tax advice; transaction charges; fund administration; legal, compliance and governance charges.
Writing in the latest newsletter from the Transparency Task Force, Tugendhat claims financial firms routinely take more than 100 different types of charges and costs from pensions and investments.
Hidden charges
“Many are hidden from the consumer and this plainly wrong,” he said.
Together whether the task force, Tugendhat has scrutinised pensions for every charge applied from the start date to the winding up date.
“We have uncovered lots of costs that consumers are never told about,” said Tugendhat. “We need to know why financial firms and fund managers do not tell consumers about these costs.
“These charges can make a significant inroad into someone’s savings and impact on the amount they have saved for retirement.”
Trade bodies for investment firms, insurers and pension providers argue that investment managers add value to savings and can improve returns for consumers by pooling their cash to make investments more efficient.
Call for transparency
A spokesman for the Association of British Insurers said: “We back any efforts to make investment costs clearer and ways to meaningfully compare them.”
Regulator the Financial Conduct Authority is due to release the findings of an investigation into fees and charges with the aim of giving consumers better value for money soon.
“Fees sound small but soon add up,” said Tugendhat.
“I want the Department of Pensions to change the rules so pension providers have to publish fund statements for consumers net of charges and to include a breakdown of the charges and exactly how much was paid to the provider.
“They should also be cumulative so consumers can see how much they have paid and published in a way that is comparable between providers.”
