A new report from ShareAction, the charity that promotes responsible investment, says the UK pensions market is too complex for savers.
The report - Realigning Interests, Reducing Regulation - said the industry should stop using heavy-handed regulation to promote behavioural change in the pensions sector and instead encourage fit-for-purpose business models and governance structures.
ShareAction has undertaken significant research into the best-performing pensions systems globally, and the report highlights areas where the UK falls short relative to that benchmark.
For example, the report compares trust-based, contract-based, and master trust schemes in the UK, as well as Dutch, Danish, and Australian workplace pension systems.
After charges and inflation, but before tax, Danish workplace savers received annualised real net returns of 3.8% between 2000 and 2012, compared to an average of negative 0.7% for UK savers over the same period.
In Australia, policymakers have promoted consolidation where the average scheme now has 26,000 savers compared to an average of 2,500 in the UK.
ShareAction says the UK's pensions system is creaking by comparison, with two regulators, two legal regimes and every more detail rules and codes of practice.
Camilla de Ste Croix, senior researcher and policy officer at ShareAction and author of the report, said savers find the system off-putting, despite emphasis from the government on the benefits of giving savers freedom and choice.
She said: "The key to successful reform is not more red tape. What is needed is for pension funds to adopt business models and governance models that achieve alignment with savers' interests."
"Other countries we studied have fit-for-purpose business models in their pensions sector with results that are positive for savers, taxpayers and the robustness of their economies."
The report is not good news for savers, particularly the nine million people being brought freshly into the pensions system through auto-enrolment.
On the run towards retirement, known as the accumulation phase, savers have inadequate access or rights to information about their savings, the report says.
"Scheme accountability and communication is a particular weak feature of the UK's pensions landscape compared to other well-performing pension systems around the world," said Camilla de Ste Croix.
First published 16.07.2015
Lindsay.sharman@wilmingonplc.com
