The wide range of member charging structures in existence across workplace pensions makes it very difficult to compare providers in terms of value to money. Prior to Nest’s breaking of the monocharge consensus with its contribution charge plus AMC model, comparing charges was relatively straightforward. Providers’ disparate member charging approaches make comparing outcomes net of charges challenging. Individuals starting saving at older ages will pay more than those starting at younger ages where a contribution charge is in place. Conversely, schemes operating an administrative charge may completely wipe out small pots left by individuals who only contribute into a scheme for a short period of time, even though this approach may be ‘fairer’ in that it reduces cross-subsidy of charges by one member to another. People with large pots, meanwhile, subsidise those with small pots under a flat rate AMC model. All approaches impact some groups adversely.
It is anticipated that some master trust boards will recommend reducing charges as asset values grow and greater economies of scale are achieved.
Schemes offering a bespoke price to each employer
- LifeSight (Willis Towers Watson)
- Scottish Widows
Schemes offering a hybrid charge
- Standard Life
- Nest 1.8% contribution charge, 0.3% AMC
- Now: Pensions 0.3% AMC, £1.50/month admin fee