That leave be granted to introduce a Bill entitled an Act to provide for greater transparency in relation to charges that may be imposed in the administration of pension schemes, for that purpose to amend the Pensions Act 1990, and to provide for related matters.
A pension is often the second most expensive item a person will purchase during his or her working life, after a home, yet understanding the fees and charges is really difficult. For years, various Government reports and reports from international think tanks have highlighted the problem of relatively high charges and fees in Ireland and the lack of transparency in terms of how they are presented. A pensions report in 2012 from the Department of Social Protection noted that there are significant deficiencies and inconsistencies regarding transparency, with little evidence of a culture of providing clear information in a simple manner. Likewise, a 2014 OECD report on Ireland's pension fees stated "One of the most patent signs of a governance failure in [Ireland's] private pensions system is the high charges often observed", which are "substantially above the charge levels observed in the best performing countries like Denmark or Sweden, where total management fees are below 0.5%". The experience in Ireland is completely out of kilter with analogous European Union states.
The Minister for Social Protection, thanks to the initiative taken by the Labour Party, has now acknowledged the extent of this problem. She has confirmed to me, by way of a reply to a parliamentary question, that her Department has recently called on the Pensions Authority to introduce a cost transparency initiative, which is an admission of the problem. I hope the Minister and the Government, along with Opposition parties, will have the good sense to fully support this Labour Party Bill, which addresses the lack of transparency around fees charged and ultimately ensures that workers and pensioners can get a better deal and thus have a better quality of life in retirement.
As it stands, most ordinary people are paying extraordinary sums of money from the pension pot they have worked hard to fill over time in excessive pension management charges and fees. Despite the reports repeatedly referring, ad nauseum, to the problem, there has yet to be any real action from the Government to address the real problem of the opaque nature of pension fees. This Bill, if passed, will finally require pension trustees to provide clear and concise information about the number and amount of charges under the scheme in both cash and percentage terms. In simple terms, it will mean that pension customers will be able to see exactly how much they are being charged and how this will have an impact on their final pension pot without having to decode the complicated small print in annual budget statements or resorting to getting a degree in financial accounting or actuarial studies in order to understand what it all means. In brief, these changes will radically transform the information available to savers and ensure that they can reliably compare the large amount of products on the market and get the best value for their retirement.
This comes down to protecting workers, protecting current and future pensioners who are doing their best to put away an adequate nest egg for their retirement. This will become particularly important as we roll out auto-enrolment for pensions for those who do not have coverage. People need to understand what these fees involve. This will drive competition by making sure fees are presented in a more transparent way, thus equipping people with the information they are entitled to have to get a better deal for themselves. It will also make the multibillion euro pensions industry honest. In addition, it will help to ensure that the very significant tax reliefs provided to incentivise pension savings, which are paid for by all workers through their taxes, are no longer cannibalised by costly pension charges. This is a necessary first step in reforming our pensions system and market for the betterment of working people and pensioners. I urge everyone in this Chamber, when we introduce this Bill on Second Stage, to fully support it. It is about transparency and who fears transparency?