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The present changes the past

22 February 2019

The present changes the past

Very interesting this week to see some of the announcements in the pensions arena.

Corporate Adviser magazine reports Workplace pension provider The People’s Pension announced that it will reduce its annual management charge for members with larger pension pots.

“At present the master trust provider applies a flat 0.5 per cent annual management charge (AMC). The company will move to a banded pricing structure from the summer.

From the summer members with the smallest pension pots will still pay the flat 0.5 per cent AMC. But this will fall to 0.4 per cent when members’ pensions exceed £3,000 and be cut again to 0.3 per cent for pots worth more than £10,0000. Pots worth more than £25,000 will be charged an AMC of 0.25 per cent, while pots over £50,000 will be charged an AMC of just 0.2 per cent.”

It adds that the average earner saving over their working life with The People’s Pension could see their lifetime AMC fall by more than half to just 0.23 per cent. The People’s Pension says this will boost members retirement pot by almost £55,000 when compared to a lifetime fee set at the cap of 0.75 per cent.

This is one of the largest master trusts starting to feel economies of scale and this is even before the contribution increases in April of this year, which is you haven’t communicated to your employees yet, I would get on with it!

This will inevitably shed a light on the whole charges issue again, and the fact that many schemes are still up at or around the 0.75% cap.

In another announcement, Lifesight, the master trust run by Willis Towers Watson was the first to achieve authorisation under the new rules. Another example of the traditional broking and consultancy firms setting the pace in the product arena, and blurring the lines between what consultancy and provider looks like.

It’s clear that the value chain is up for grabs, that traditional models are changing, costs are coming down. Where does this leave employers though? How is the service across the benefit universe delivered? What about the brokered relationship with the traditional Defined Contribution pension providers which are through the large consultancies?

What sort of relationship do you have with your pension provider? Is a tripartite relationship between employer, pension provider and broker? If it’s not, then why not? What value is each party adding? Analyse this and you might be surprised at the conclusions.