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Regarding charges, two particular observations emerged from the work with the RSA. First that savers did not understand the effect of charges on investment outcomes. Charges are declared as a percentage of a capital sum, but are levied annually. So a 2% charge on a pension account will absorb half the pension. Second, savers were not told about the charges that were nevertheless deducted from their account.
The work on reform began with the publication of Seeing Behind British Pensions. This created a huge response in the media, and eventually, with the help of other campaigners a government referral was made to the Office of Fair Trading. Charges on “default” pensions were capped. The OFT established Independent Governance Committees (IGC’s), to ensure that savers received value for money. However transparency of charging was not achieved.
Working with other campaigners, and with the Financial Services Consumer Panel, David wrote Investment Costs: An Unknown Quantity. The issue has subsequently been taken up by civil society groups such as the Transparency Task Force, (to which David is an ambassador), and Dr Chris Sier who is now advising the FCA.
Reform has been slow. However, in the autumn of 2018, the FCA will be issuing agreed transparency guidelines. The DWP Select Committee has announced a further investigation. The need for continuing progress on this matter is vital if the market for investment products and pensions is to be made to work.
For those with a particular interest in this field, David would suggest contacting the Transparency Task Force.