Pension providers should disclose how much their clients are being charged every year in 'pounds and pence' according to the the Financial Conduct Authority (FCA) in its retirement outcomes review.
The regulator said it wanted to bring pension providers in line with Mifid II requirements that make it clear to clients what they are being charged for investment products.
Currently these rules do not apply to pensions. Providers must set out charge assumptions in a Key Features Illustration (KFI) document but this does not include transaction costs and will often be presented in the form of a percentage.
'After reviewing a small sample of consumer communications, many firms are choosing not to include charges paid in annual communications or, where information is provided, it is presented in ways which are not easy for consumers to understand,' the FCA said.
As a result the regulator has asked for views on whether it should make pension providers disclose the 'actual charges' clients are paying as well the assumed charges.
'The charges figure should include any charge that has been levied against the consumer’s pension pot in the previous year, including transaction costs. This information should be provided prominently to consumers annually and presented in pounds and pence to help consumer understanding and engagement.'
At this stage the FCA is not consulting on the proposal but has asked for views on implementing it.
Many pension providers use a reduction in yield figure, which uses a percentage figure to show the impact of charges over a certain period of time. The regulator said it would not remove this figure, but noted that as 'many consumers find it hard to understand percentages' it would look into making providers disclose charges as a cash amount.