competition authorities have launched an investigation into the pensions market ahead of an expected surge in contributions to workplace savings schemes.
The Office of Fair Trading (OFT) will spend six months gathering evidence on the market for defined contribution schemes, which are expected to account for the majority of pension plans that new government legislation requires companies to provide. The OFT said it will focus on “value for money” and the size of pension pot that savers end up with at retirement.
The UK government’s staged transition into “auto-enrolment” – which puts workers into a savings plan unless they opt out – is designed to ensure people have enough money to live on when they retire. However, concerns have been raised that charges are too high and too variable to guarantee worthwhile returns.
Mary Starks, senior director at the OFT, said it was important to ensure providers such as Aegon, Legal & General, Standard Life and others were competing to offer the best possible deals. She added: “The workplace pensions market is set for rapid growth and change over the next six years, in particular with the introduction of automatic enrolment. It is important that these savers get a good deal.”
The industry generally welcomed the probe, although some cautioned against putting too much emphasis on low costs. Paul Macro, a partner at consultancy Mercer, said charges were not the only factor when weighing up “value for money”.