The Association of British Insurers has produced a four-point plan outlining how to make pension charges more transparent and to improve confidence in the system.
The report, which will be sent to the Financial Services Authority and the Pensions Regulator will recommend the disclosure of all transaction costs. and that pension investors are given regular clear updates about the costs and the level of pension savings invested to help people compare different schemes more easily.
Pension funds have been criticised this year for charging “hidden” fees that lower investor savings levels and put people off from saving for a pension.
ABI director general, Otto Thoresen will produce the report to help develop an industry agreed set of rules to explain charges and to allay pension investor fears.
The pensions system has been criticised by Institute of Directors for beong too complicated and bogging people down in a "forest of regulation."
The aim is that all charges are presented in a consistent and simple way that is easy to understand and transparent and covers both contract and trust-based pension schemes.
The ABI represents pension companies and fund managers and its report outlines key points that it wants to see in a draft document by the end of the year.
Mr Thoresen wants to ensure that all employees are made aware of transaction costs such as broking fees and for providers to communicate clearly to investors transaction costs as an individual’s pension fund builds up.
In his letter, Mr Thoresen said: “There has been a great deal of debate recently about the transparency of pension charges and costs. This is understandable considering automatic enrolment is currently being implemented, bringing millions of new savers into pensions for the first time, and it is right there should be scrutiny of the costs alongside the value provided by retirement savings schemes.”
Investment Management Association (IMA) director Jonathan Lipkin said: “As the IMA’s work on enhanced disclosure of costs and charges shows, we agree transaction cost information should be more accessible and are committed to achieving this goal.
The Pensions Regulator chief executive Bill Galvin said: We are very pleased the ABI has proposed this action plan and we welcome the opportunity to engage with them, as we have other industry groups such as the NAPF. Action by the industry now, ahead of the main wave of auto-enrolment, is both timely and appropriate.”
Thoresen adds: “It is critical the broader debate does not lose sight of what matters most. What makes most difference to people’s retirement income is how much they save, and how long for.
“We hope that achieving complete transparency on charges and costs will ensure the savings debate can move on to the importance of people contributing more to their retirement fund.”