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Burton pledges crackdown on the 'excessive fees' in pension industry

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Minister for Social Protection, Joan Burton

Minister for Social Protection, Joan Burton

Minister for Social Protection, Joan Burton

THE pensions industry has been threatened with new legislation to force it to make its charges more transparent.

Social Protection Minister Joan Burton, who has responsibility for pensions policy, told an insurance conference charges were too high and too difficult for consumers to understand.

But in a robust exchange with the minister, the chief executive of Irish Life, Gerry Hassett, defended the industry and insisted that charges here compare favourably with those in other markets.

Ms Burton warned: "If the necessary changes are not happening I will look at introducing stronger regulatory requirements."

She referred to a study of charges carried out for her department that showed that charges for individual and smaller occupational schemes made them expensive.

Almost a third of the value of an individual's retirement savings can be consumed by charges, the report by PricewaterhouseCoopers (PwC) and the Pensions Board found.

The minister said yesterday that many individuals and trustees of schemes do not fully understand the charges and how they apply.

"A move towards greater clarity and transparency of pension charges is needed so that consumers should understand that a modest charge can have a very large impact on the final pension," she told the Irish Insurance Federation conference.

But Mr Hassett of Irish Life disputed the claim that charges were high in this country compared with others. Criticism of the industry about charges were unfair, he said.

He insisted that insurance companies here "ultra-competitive".

The Irish Life boss said PwC used fees and charges for pensions in Britain as a benchmark.

"It might surprise you then to learn that our industry is quite prepared to be benchmarked against the UK.

"The issues of scale remain, but this market is ultra-competitive and this competition has led to exceptional value for Irish employees," Mr Hassett said.

Costs in Ireland were high because of the small scale of the market compared with the size of Britain, he addd.

The Irish Life boss questioned the assumptions made in the PwC study.

It assumed the very highest fees were being imposed by pensions advisers. Using this assumption meant very high costs, which were "entirely notional".

COMMISSIONS

He said PwC had used a level of "fees a consumer could pay if their adviser opted for the maximum commission options available. Given the competitive nature of the market, this almost never happens".

But Mr Hassett accepted that the whole area of fees and charges on pensions were confusing for consumers.

He said he advocated a situation where greater transparency in how fees were explained.

The minister said she was introducing measures to make charges more obvious, but if the industry does not co-operate, she will bring in even tougher rules.

Irish Independent