Millions of pension savers are being warned they could be losing out on thousands of pounds from their retirement pots.
The alert has been raised by the DWP and watchdogs who plan to force pension schemes to come clean on their performance and charges.
Under plans drawn up with the Department for Work and Pensions and The Pensions Regulator, pension schemes will have to publish clear data on performance, costs and service quality so savers can see whether they’re getting decent value for money.
The FCA says over five years a typical £10,000 pension pot could grow to only £10,400 in a poor scheme, compared with £15,100 in a high-performing one over the same period – a difference of nearly £5,000.
FCA deputy chief executive Sarah Pritchard said: “Good value isn’t just about low costs – it’s about strong performance, good service, and transparency.
“We want to see a focus on value. By working with government and The Pensions Regulator (TPR), we will help secure better returns for pension savers.”
The proposals would also introduce a simple colour-coded rating system – from dark green for strong value to red for poor performance – to make comparisons easy for ordinary savers.
TPR chief executive Nausicaa Delfas added: “Millions of people rely on pension income to support them through later life. We have to make sure they get value for their money.”
And Pensions Minister Torsten Bell said it was “simply too difficult” for savers to judge whether their pension was working for them, adding that the new framework will show “if they are getting a good return or not.”
Schemes that consistently fail to deliver could be forced to improve or see members moved to better-performing alternatives, part of the FCA’s drive to root out poor value pensions.
A consultation on the proposals is open until March, with final rules only confirmed once responses are considered and legislation receives Royal Assent.
