Thursday, 26 October 2017

It’s Not Just About Costs

The announcement today from the Government with regard to cost transparency is welcome. It should not be hard for members to understand what they are paying – and what costs are being charged for both administration and investments.

There is one concern though- a rush to the lowest charges may not mean the best deal. There needs to be care involved in explaining costs. A higher administration charge in some cases may mean a local company DC plan can continue, rather than being swallowed up by one of the big providers, or by a master trust. And there’s a good reason for that additional cost if the result is a plan that is better suited to that company’s workforce, as well as it being better presented and explained.

As to investment costs being more transparent- about time too! But again, take care in explaining that lowest charges don’t always equate with best returns.

As employers and providers, we can’t just rely on costs being understood. Members need to understand the value of their pension plan, the fact that it’s tax efficient and that employer money is being paid in as well. These are basic things, but so often still misunderstood by a workforce that is apathetic to pensions. The employer and provider can’t afford the same apathy.

As always, pensions will remain complicated. And it's not just about costs. Good communication is key. Enthusiasm from the provider and employer sponsor is key too.

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