Tackling the pensions rip off

Recent weeks have seen growing evidence of the living standards crisis. While things are looking up for millionaires, who have benefited from the tax cut George Osborne gave them in April, millions of ordinary people are facing train fare increases of up to 9.1 per cent and wages which are now nearly £1,500 per year lower than they were in 2010.

Often less obvious to people – at least until it’s too late – but no less of a scandal is the rip-off of high pension charges. People who have worked hard all their life, doing the right thing and saving for their old age, reach their retirement only to find that their pensions are much smaller than they could have been as high charges levied by the financial services industry eat away at their savings. As Ed Miliband has said, people can see half the money they put in being lost in fees and service charges. It is a massive issue that is coming down the track.

The fundamental problem is that the pensions market in the UK operates on the basis that an informed, engaged consumer will get a good outcome. But most consumers lack access to the information about pensions which would allow them to be informed and engage. Pension providers are not telling people what they are really being charged, meaning savers risk being ripped off. If they haven’t started doing this by the time we get into government, we will force them to do it.

We also need the new state-backed pension provider – the National Employment Savings Trust or NEST – to be able to compete with commercial rivals, forcing them to drive down their charges. After criticism from MPs of all parties, the Government has said that they will relax the rules which prevent NEST from competing and driving down costs in the industry, but only from 2017. This is far too late for savers who will already have been enrolled into the new system before NEST is freed up to compete. The Government should be acting now.

Ordinary savers are being let down by an out of touch Government, which is failing to take the decisive action necessary. Labour is standing up for ordinary savers who are doing the right thing and is tackling the pensions rip off.