OFT launches investigation into pension charges The mass closure of final salary schemes, where companies carry the risk of investment performance, has exacerbated the problem. The number of "active" pension savers in the UK fell from 12.2 million at the peak in 1967 to 8.2 million in 1967, according to the Office for National Statistics. Nest (National Employment Savings Trust) has been hailed as the answer, with backed calling it the biggest pensions revolution since David Lloyd George ushered in state pensions more than a century ago. The scheme, where employees are automatically included but have to ask to opt-up, began in October for companies with 120,000 or more workers, with smaller firms gradually being enrolled over six years. The Office of Fair Trading (OFT) expects eight million people to be enrolled in the scheme by 2018. It is concerned that with the vast increase in volumes being saved into pensions that these new savers would benefit from low cost, high quality pension schemes. The market report will investigate competition between pension providers, whether there is sufficient pressure on pension providers to keep charges low, and how transparent these charges are to savers. As auto-enrolment will in time effect smaller companies too, the study will also look at whether small firms are properly equipped to offer fair and successful pension schemes. The OFT said it would be working closely with the Department of Work and Pensions, the Pensions Regulator and the Financial Services Authority and during the investigation. Mary Starks, a senior director at the OFT, said: "The UK workplace pensions market is set for rapid growth and change over the next six years, in particular with the introduction of automatic enrolment. It is important that these savers get a good deal. We want to take a look at the market now to ensure that providers are competing to offer the best possible deals, and that the choices made by employers mean that employees are saving into good pension schemes for their retirement. The financial services industry admitted that Britons are "often very suspicious of pensions," a view it wants to shift. Joanne Segars, chief executive of the National Association of Pension Funds (NAPF), said: "People are often very suspicious of pensions, but that perception needs to change if our society is to save enough for its old age. Millions of people will get a new workplace pension under the much-needed auto-enrolment reforms, and they need to have more confidence in the product. There is no point bringing them into a pension that they do not trust. The OFT study is a useful initiative and part of a growing focus questioning whether pensions can offer more value to savers. Charges and annuities are a particular concern, and we hope the OFT sheds some light on these issues, which can make a huge difference to a pensioner's income. The market is changing and charges have fallen over the years, but there is still further to go to ensure people get the best possible value from a pension. The industry has made attempts to try and deflect criticism. Last week, the UK's largest pension providers promised to disclose the full costs to employees in workplace pension schemes. Tom McPhail, head of pensions research at Hargreaves Lansdown, a private pensions provider, said he was concerned that the OFT investigation may focus only on price, without looking at important aspects of pensions such as quality of administration, stability and crucially, "member engagement" - getting people to save in the first place. "Without good member engagement it is unrealistic to expect good outcomes from DC pensions; any investigation which looks only at price without considering whether the services provided actually deliver good outcomes will only be looking at half the equation," he said. Steven Cameron, head of regulatory strategy at Aegon, welcomed the investigation's focus on smaller firms. We're pleased to see OFT will also examine if smaller firms receive help and advice. Advisers play a key role and we have concerns regulation is making it harder for them to help such employers. Advisers also encourage greater employer engagement which is particularly key as we progress with auto enrolment," he said. The investigation is expected to take six months. The OFT will then decide whether to recommend an investigation by the Competition Commission.