A main feature of yesterday’s news agenda was the issuing of the Office of Fair Trading’s (OFT) report: “Defined contribution workplace pension market study”.

The report itself is a rather chunky document at 175 pages. I have just wasted a significant amount of the rainforest (not to mention an entire black ink cartridge) producing a hard copy of same to work my way through. But even before I commence this major task, my initial reaction is that the timing of this report is, frankly, awful.

We are now almost exactly one year into the great experiment known as pensions Auto-Enrolment (AE). The very largest employers in the UK have already staged, and in the near or middle distance the remaining employers of any size will also be undertaking this task. AE is necessary as the UK simply must do something to reduce the pension savings gap before this demographic time bomb finally detonates.

And for AE to work, it’s important that employees have confidence in the pension schemes which they find themselves enrolled into. So for a Government department to publish a report that suggests that many pensions are not fit for purpose, at this crucial time, is potentially an own-goal of massive proportions.

To demonstrate this, let’s look at the initial media coverage regarding the OFT report yesterday morning. Various publications and media suggested that the recently launched NEST pension scheme would now have to justify, or revisit, their charges as a direct result of the OFT report.

Now I have never been a fan of the two-tier charging structure that NEST utilises, but to suggest that NEST is an expensive scheme - which may not be suitable for Auto-Enrolment as a result - is just way off the mark. The direction of travel for charges in company pension plans has been markedly downwards ever since the introduction of Stakeholder pensions at the start of the last decade. NEST is a low-cost scheme when compared against many current pension schemes, and much, much cheaper than pension products of only a few years ago.

I’m not denying that a current and continual review of the charges and shape of the UK pensions market is necessary, and I am quite certain that some employers could and should review their pension scheme to ensure that charges are acceptable. But, right now, a more significant challenge is to ensure that AE actually works, and that by the end of the process we have a very high percentage of the population savings towards their retirement. The media coverage of the OFT report has the potential to disengage many potential savers from taking the important first step of commencing saving for their retirement.

And if the working population are not actually saving in any pension scheme, it becomes just a little bit academic what the underlying scheme charges actually should be.

Best regards

Steve