Britain’s opposition Labour Party called for lower fees on private pension plans, saying consumers are losing money through concealed charges and penalties for changing providers.
“Right now, a worst-case scenario could see a pensions saver lose up to half of their pension thanks to hidden costs and charges,” Labour’s spokesman on pensions, Liam Byrne, said in an e-mailed statement. “We’re determined to make sure savers are served by every pensions company playing to the standards of the best.”
The opposition party published a policy document today calling on Prime Minister David Cameron’s government to take urgent action over fees. New legislation takes effect in October under which workers will automatically be enrolled in company pension plans unless they opt out.
Speaking last week, Labour leader Ed Miliband said pension fees would be the next scandal in British public life, following uproar over journalism and banking.
A pension fund charging 2 percent a year will reduce the value of the fund by 49 percent over a 20-year period due to compound interest, according to SCM Private, a fund-management firm campaigning against high fees.
The director general of the Association of British Insurers, Otto Thoresen, criticized Labour’s comments as misleading, saying that fees “have been falling steadily for the last decade” and the average annual management charge is now 0.77 percent.
“Much of this so-called policy document has a ‘back of an envelope’ feel about it,” Thoresen said in an e-mailed statement. “The extra costs Labour highlights are transaction costs that include stamp duty and relate only to particular types of actively managed funds.”