A new joint industry code of conduct has been published by a group of pensions experts to provide a consistent disclosure of charges and investment costs for the first time in light of auto-enrolment.

The National Association of Pension Funds (NAPF) and the Association of British Insurers (ABI), in association with the Investment Management Association (IMA) and the Society of Pension Consultants (SPC) are backing the code, and are encouraging others to follow its practices.

The code stipulates that all charges are clearly and accurately stated in writing, and that employers receive a standard template summarising the pension charges levied and the corresponding services.

It also states that employers must be able to see examples of how different levels of charges and charging structures could affect the pensions pots of their employees, either through a document or a dedicated web tool.

Joanne Segars, NAPF chief executive, said: "Charges are a big concern for many people, and this code will help put a spotlight on the fine print.

"Employers need to be able to see more clearly what is being charged and why. They will then be more likely to pick the best pension for their staff. The code sets out a template for explaining charges that will make it easier to compare the cost of pension A with pension B."

The code will be implemented in two phases. The first is on 1 January 2013 when the code should be used as a guide for best practice.

The second begins one month after the launch of the dedicated web tool, which is expected to start from 1 April 2013. All provisions of the code will apply during this stage.

Jonathan Lipkin, IMA associate director of pensions and research, said: "This code provides a template that will apply across the pensions market, and we welcome the progress made over the past twelve months. But this is the beginning of the road.

"Much more has to be done to ensure that scheme members themselves feel greater confidence in DC schemes, whether trust-based or contract-based. This means an emphasis on overall governance as much as disclosure."

SPC president Roger Mattingly said: "There is welcome recognition that employers' decisions should be driven by value, not just cost. A 'race to the bottom' on charges would be fraught with danger for members. This needs to be kept firmly in view when the code comes into operation."

He also explained that it is generally recognised that the code cannot be applied as a one size fits all template, and this is particularly the case when there are existing client, adviser, or provider relationships.

The code was developed by a group made up of trade, consumer and industry organisations, and pension providers.

Morten Nilsson, NOW: Pensions chief executive officer, a multi employer trust, said: "The need for low and transparent charges has been one of our key messages since we launched NOW: Pensions in the UK last year. We were thus delighted when the NAPF initiated the charges code of conduct."

He added: "Having clarified costs the next important issue is whether the investment solution and risk management is appropriate and can deliver decent returns."


First published 28.11.2012

monique_simpson@wilmington.co.uk