How the Government can solve the pensions time bomb The FSA has recently estimated that over the past decade around 30 per cent of pension pots have gone in charges. There is no effective competition, so abusive practices abound. We have entrance fees, exit fees, churn fees and trailing commissions. If the market can't fix this and the industry won't, the Government has to step in and protect the consumer. First, simplicity should be enforced. We should look at what is proposed for electricity and gas charges with standard tariffs to assist comparability. We need the same in this industry. Other countries have acted on this and we need to follow suit. Similarly, enforced simplicity would aid in the process of annuity purchases: an area where many currently make poor choices. Indeed, on annuity purchase, there is a case for insisting that a different company supplies the annuity to that which supervises the accumulation of the pot. This will force a market-based option. Secondly, there is a case for a cap on charges. The industry is concerned this will stifle innovation. The reality is that it would force the industry toward low-cost, passive investment. Exactly what most people need. Thirdly, we must remove the restrictions around the National Employment Savings Trust (NEST) to allow it to compete properly in the market as a best practice supplier. The private sector has failed to come up with solutions to make the market work and the time has come to act. Denmark has achieved very low charges on pensionable assets through something very similar to NEST and other countries are moving in that direction. The government has done its bit over the last two decades with generous tax relief for the industry. Too much has funded charges and not enough converted to pension entitlements. The supernormal profits enjoyed by the industry may have helped property prices in Kensington, but there has been little benefit for pensioners in places like Warrington. There is a phrase used in business which describes the current situation: Playing it Long. The industry knows that it is making unsustainable profits and that that will have to change, because eventually Parliament will get around to fixing it. Auto-enrolment has made it even more important to fix the situation. If the state is introducing quasi-compulsion it must do what is necessary to ensure savers get value for money. The pensions industry cannot be left to play it long and hope that Parliament takes a long time to do something about an industry that has failed. David Mowat is the Conservative MP for Warrington South. He is Parliamentary Private Secretary to Greg Clark, the Financial Secretary to the Treasury