Financial watchdogs have revealed pension providers are still ripping off hundreds and thousands of retirement savers with high charges.
Around 300,000 savers have smaller than expected pension pots due to providers offering them poor value for money, said a joint statement from City regulator the financial Conduct Authority (FCA) and the Department of Work and Pensions.
The announcement followed a joint review of the market by both bodies.
They found retirement savers in auto-enrolment or workplace pensions were benefitting from charges falling below 1%.
But accused a handful of financial firms of charging high costs and charges.
Challenge to explain fees
These firms, they say, will be challenged to explain why they are continuing to treat customers unfairly.
FCA CEO Andrew Bailey made clear that he expects these firms to change their policy.
“Pension providers look after the savings of millions of customers and it is vital that they provide good value for money,” he said.
“There is still more to do so we will be contacting the providers who have not yet taken satisfactory actions to remedy poor value schemes and we expect them to act swiftly to ensure good value for customers.”
Pensions Minister Richard Harrington backed Bailey’s comments.
How high fees impact pensions
“I am pleased that more than a million pension savers will benefit from our push to curb excessive charges in legacy schemes,” he said.
“Nevertheless, some people are still at risk of high charges, so I shall be seeking assurances from the providers of those schemes, that they will be taking steps to resolve this issue.”
Financial experts worked out that a modest increase gap in charges from 0.75% to 1% on a £100,000 pension over 20 years could mean a £10,000 difference in fund size at the end of the term. The figures annual fund growth of 5% before charges are deducted.
The study suggests that more than £25 billion of pension funds are still at risk in high-cost pension schemes.
The research follows up an Office of Fair Trading investigation in 2013 that triggered government and regulatory action against pension firms accused of ripping off hundreds of thousands of retirement savers by charging fees that were too high.
