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OFT launches pension schemes investigation

The Office of Fair Trading (OFT) has launched an investigation into pension schemes following the Government’s introduction of automatic enrollment.

A study will be launched into the reasons behind why defined contribution workplace pension schemes are set up, and whether they are good value for money.

OFT said over the next six years, the workplace pensions market will be subject to rapid growth after the Government set up a scheme to automatically place workers on an pension programme, which they can opt out of.

Auto-enrollment was introduced in October last year, when the Government said it hoped to have 4.3m people saving for retirement by May 2015.

OFT said approximately 4m in the UK are currently defined as contributing to a pension, and auto-enrollment will bring an additional 6m to 9m workers into a pension scheme.

With the Government announcement that the whole pensions system will be administered on a flat-rate from 2017, OFT’s investigation could not be more timely.

The study will examine how providers compete to offer pensions, and how this could change over the coming years.

Smaller firms will find out if they could face issues with making decisions in the interests of their employee’s pensions, and OFT will also investigate whether pension providers are under enough pressure to keep their rates low.

Further to this, obstacles to switching schemes will be examined, and issues around employer-employee dialogues about setting up a pension will also be under scrutiny.

OFT said outcomes of the study will look at whether competition between pension providers will be in the best interests of those saving for their retirement, with the delivery of low cost, high quality pensions.

Mary Starks, senior director in OFT’s Services, Infrastructure and Public Markets Group, commented: “The UK workplace pensions market is set for rapid growth and change over the next six years, in particular with the introduction of automatic enrolment.

“It is important that these savers get a good deal. We want to take a look at the market now to ensure that providers are competing to offer the best possible deals, and that the choices made by employers mean that employees are saving into good pension schemes for their retirement.”

The Department for Work and Pensions will be instrumental in the project, along with the Pensions Regulator and the Financial Services Authority and several other associations and trade bodies.

Results are expected to be made public by OFT by August this year.

This was posted in Bdaily's Members' News section by Miranda Dobson .