IRELAND - Paul Kenny, the Pensions Ombudsman, has hit out at defined contribution pension providers and trustees for what he describes as misleading communications around the marketing of DC schemes' funds and terms and insufficient analysis of charges.
Speaking at the IAPF DC conference in Dublin today, Kenny attacked DC plan descriptions suggesting assets are "assured" or "secure" when they are found to be nothing of the sort, and called on trustees to try and simplify members' understanding of their investments by limiting the range of funds available given they carry all of the risk of their investments.
"Defined contribution employees now outnumber defined benefit members
in the private sector and as they take all the risk it is more important than ever that providers communicate clearly," said Kenny.
"A great number of the complaints we get arise from poor communications. Pensions are complicated enough but there is no need for bad communications to make them more difficult.
"And it is far too common a view that, when it comes to investment choice, more is better: 10 funds are better than five, 20 funds are better than 10 and the ideal is about 200. This is not true."
He continued by criticising the labels given to some funds by marketing departments for being opaque by asking ""with all due respect to the marketers, what exactly is an ‘evergreen' fund?" and argued DC members need to have a clear understanding of how their money is invested.
At the same time, he said further transparency is needed on charges to customers and called on trustees to pay more attention to costs as he claimed trustees are more likely to find it easier to improve returns by controlling costs rather than selecting the best asset managers and providers.
"All too often, those setting up a DC scheme are not going to be members and so
pay far too little attention to charges. Trustees have a clear responsibility in this area. Trustees must pay attention to costs in order to fulfil their responsibilities," added Kenny.
In a bid to encourage greater clarity in managing defined contribution schemes, the IAPF has launched the first DC awards to recognise good communications strategy.
Patrick Burke, chairman of the IAPF, presented the first overall award to the Hewlett-Packard Ireland defined contribution plan while Accenture defined contribution pension plan took the runner up prize and the CHC Ireland retirement solution plan earned a special merit award.
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