The People’s Pension has added an annual member charge in a move it says is designed to make it fairer and futureproofed against the ongoing impact of Covid-19.
B&CE, the provider that backs The People’s Pension, has also furloughed 140 workers in response to the pandemic.
A new annual charge of £2.50 per member has been added to the charging structure. It will be deducted from members pension pots later in the scheme year, given current market volatility.
People’s says the new combination charge structure reduces the cross subsidy by active members of millions of small, inactive pots which are increasingly created by auto-enrolment.
The Corporate Adviser Master Trust & GPP Defaults Report, out next week, shows that The People’s Pension has 3m deferred members as at 31.12.19, compared to 1.87m active members. The general levy is charged on a per-member basis.
The new combined AMC now consists of an annual charge of £2.50 deducted during each scheme year, a management charge of 0.5 per cent and a rebate on the management charge of between 0.1 per cent on savings over £6,000 and 0.3 per cent on savings over £50,000.
The People’s Pension says it will halve the starting rate for a rebate on its management charge to £3,000 from £6,000, to encourage members to save more for their retirement and consolidate their pots. Nearly half a million of The People’s Pension members would benefit currently. This will be implemented later this year.
The provider says a member on an annual salary of £20,000 with an initial pension pot of £3000, will pay the equivalent of just 0.3 per cent in total annual management charges if they save for 20 years.
B&CE CEO Patrick Heath-Lay says: “As we evolve our charging approach to meet changing requirements, we think this approach combines fairness, incentives to save, and prudence. Our modified charging structure cuts fees as members save more, reduces the cross subsidy from actively saving members to inactive small pots, and futureproofs revenues against the unpredictable financial impact of COVID-19.
“These changes ensure we offer fantastic value for money to active savers of all types.”