Pensions administrators are using special projects to "rip off" customers by charging “completely unreasonable” fees, an administration expert has claimed.

Premier Pensions Management head of administration Dan Taylor explained the “hidden area of admin costs” is in special projects such as GMP reconciliation, buy-ins, buyouts and other de-risking projects.

However, he said administrators know trustees have to do GMP reconciliations so they are using it as an “open licence to rip off clients”.

As an example, Taylor said a typical core admin fee may be £300,000 but some administrators are then charging £600,000 for a special project, which is two years’ worth of admin fees.

“There are some providers in the market who don’t even give a seconds thought about writing a half a million pound fee proposal,” he added.

As a result, Taylor noted that many schemes are now starting to shop around for administrators offering reasonable admin project fees.

“There is not a single DB scheme that is not doing a project on the side of their core service,” he said.

A recent survey on administration fees by KGC associates revealed over 10 per cent of firms gained approximately 25 per cent of their revenue from project work. For over 36 per cent of participants, 15 per cent of revenue came from projects.

Independent Trustee Services director Chris Martin said he has not had any experience as a professional trustee of feeling ‘ripped-off’. He explained that a special project has value to a scheme and it is down to the trustees to evaluate whether a project is worth it, in the context of what the scheme is doing.

“If the project doesn’t fit the circumstances of the scheme then you don’t do it but if it fits the circumstances of the scheme then it should be seen more as an appropriate investment of time and effort in getting the scheme’s record and data up to date,” he added.

However, Martin has seen an increase in pension schemes using specialist providers to do special projects, leaving the core administration services with the incumbent administrators.

“One of the key things from a trustee perspective is being able to keep the continuity in place for the members, in terms of who they deal with on a regular basis. If you can appoint XYZ to carry out a specific project behind the scenes, the members don’t even need to know about that so they don’t feel any of the disruption,” he added.

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