Getting the UK pensions industry to cooperate on fee transparency will be an “ongoing battle” and not concluded overnight, the pensions minister Steve Webb has admitted.
Speaking at the WorldPensionSummit in Amsterdam, the Liberal Democrat MP told delegates the Department for Work & Pensions had already identified a number of fees it would like to ban – a reference to last month’s consultation on the feasibility of imposing a charge cap.
But he added that, beyond attempts to ban certain costs, transparency would be the goal.
“Our financial services industry is beginning to work on transparency and consistency of disclosure,” he said.
“The trade bodies are generally a force for good, funnily enough,” he added, while conceding that not all individual companies were “great”. “The trade bodies, on the whole, realise the [risk of] reputational damage to their industry.”
Asked how he proposed to achieve such transparency when other countries, such as the US, had battled for a decade without achieving great results, he said: “I don’t dismiss the difficulty of defining what is included in costs and charges, getting transparency and drawing a line somewhere – I think that will be an ongoing battle.”
Webb also spoke more broadly of the reforms he had overseen since being named minister in 2010, more recently focused on changes to ensure the adequacy of auto-enrolment default funds.
“The first thing I had to do was reinvent the state pension system, and funnily enough, make it look pretty much like everyone else’s,” he said, noting that that involved a shift to a flat-rate payment.
“Not revolutionary for you, I suspect, but revolutionary for us,” he added.
Webb also credited the Netherlands for helping devise some of his reform ideas, noting that he had seen the term ‘defined ambition’ in the country and decided to use it for his proposals to reintroduce greater risk-sharing.
“Now that the UK talk about defined ambition, people think I’ve come up with some very clever phrase – so don’t let on,” he said.
He also acknowledged there would not be great appetite for recently unveiled proposals for a flexible defined benefit (DB) system that could see employers begin to offer DB pensions lacking, for example, indexation.
“That’s going to be a minority sport, that’s going to be the best firms, the biggest firms who want to do more,” Webb said.
He further noted that the current contribution levels under auto-enrolment were not high enough, but said it was more important to get workers saving at all before worrying about the adequacy of savings rates.