How much retirement savers are paying out in hidden pension charges is about to be revealed as the government acts to expose rip-off fees in the industry.
Ministers have urged pension providers to clean up their act and make the costs of their schemes clearer to savers for some time without success.
Now Pensions Secretary David Gauke has taken the first step to force the firms to tell savers what they are charging and where the money goes.
The first phase is aimed at workplace pensions.
Up to 10 million savers are expected to benefit from Gauke’s proposal which is aimed at revealing if providers are giving value for money.
A tool for comparing value for money
“The government is beginning to address a fundamental imbalance that exists in the pensions industry,” said Gauke.
“For too long savers have been in the dark about where their pension is invested, what they are paying for, and why they are paying it.
“I want people to have a strong sense of personal ownership over their pension savings. These proposals do just that and will open the industry.
“By giving people the tools to better understand their options and compare value for money, I believe we are creating a generation of smarter, more informed savers.”
The charge details will be published on an annual pension statement that will come in a standard format across the industry, so retirement savers can easily compare costs and investment returns.
Revealing rip-off pensions schemes
The statement will also show how compounding the costs impact pension savings.
Gauke says firms will be forced to publish their charges online and if they fail to do so, could be fined up to £50,000 under proposed legislation.
The disclosure impacts all money purchase workplace pensions.
The next step in spreading the measure across the industry will be introducing similar rules for workplace direct benefit and personal pensions, added Gauke.
The hope is workers will move their pensions from rip-off schemes once they can see how the charges impact on their lifetime savings.
Michelle Cracknell, chief executive of The Pensions Advisory Service, said that “making informed decisions relies on having the right information.”