The U.K.'s Office of Fair Trading is worried that managers of defined contribution retirement plans aren't ensuring that employees get the best investment outcomes, the regulator said in a statement Thursday.
Some plans don't generate enough value, and it's difficult for employers to select the best plan because the way providers present charges make them difficult to compare, the OFT said.
“It is not the individual consumer that makes the choice about their pension; it's the employer,” said Barbara Limon, a program manager at Age UK, a British charity that gives advice to the elderly. “You get the pension that comes with the job. That's why it is important that they are all good quality.”
With defined contribution plans, the annual contribution amount is specified, but the future benefits are not guaranteed. Currently, around 4 million people are part of a defined contribution workplace pension program, according to the regulator. By 2018, this number will double.
Over the next month, the OFT said it will discuss its concerns with the retirement industry, government officials and regulators to consider what actions need to be taken. The OFT could refer the matter to the Competition Commission, which has the power to propose structural changes.