Breaking News

French Planes Carry Out First Strikes on Iraq Islamic State Targets
Tweet TWEET

U.K. Employees Warned of ’Buying Blind’ Into Pension Plans

U.K. employees enrolling in company- sponsored pension plans may be “buying blind” into funds charging high fees that could reduce their savings by as much as 50 percent, according to a report by Cass Business School.

Ninety percent to 97 percent of employees joining a company pension plan use the default fund offered, meaning whether they end up with a large or small retirement fund is a “lottery” due to fees, said the report. Smaller employers are more likely to use older funds with higher charges, it said.

“For too long many U.K. employees have suffered from high- charging pension schemes with choices and charges that are difficult to understand and which do not deliver what members expect,” said Morten Nilsson, chief executive officer of NOW: Pensions, a Danish retirement fund manager, that paid for the report. Employees “should be able to contribute and see their employer contributing, safe in the knowledge that they will get a pension which is good value for money.”

The government this month introduced an automatic- enrollment pension policy that requires companies to offer a retirement plan and employees to opt out rather than opt in. The average British mutual fund charges 2.21 percent of its clients’ assets annually, compared with 1.04 percent in the U.S., according to academic research published by the Review of Financial Studies in 2009.

To contact the reporter on this story: Kevin Crowley in London at kcrowley1@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.