Now Pensions defends member charges following MP criticism

Now Pensions has responded to Labour MP Steve McCabe's criticism of the provider's member charges, saying that it was “clear to members” how much the charges were.

Work and Pensions Committee member McCabe said that Now Pensions' charging model had “eaten away the entire pot of some of their customers”, in a parliamentary hearing on 6 February 2019.

He was referring to the £1.50 admin fee the provider charges each member per month, on top of a 0.3 per cent annual management charge.

In a letter to McCabe, published yesterday (18 February), Now Pensions director of policy, Adrian Boulding stated: “When we entered the UK market in 2011, we spent a lot of time considering how to structure our member charges so that they are simple, transparent and fair.

“Most pension providers charge a flat annual management charge based on percentage of the fund. As you know, we took the decision to combine a low investment charge (0.3 per cent) with a pounds and pence monthly administration charge.”

He also said that, although its average pension pot value was small, its members would eventually “see their overall equivalent charge reducing” as members continue to save and auto-enrolment minimum contributions increase.

Boulding continued: “We do believe that our dual charging structure is very cost efficient for our members over the medium to long term, and analysis from Defaqto bears this out as it shows that the Now Pensions charging structure will lead to more valuable pots over 10, 20, 30 and 40 years when compared with our competitors.”

Now Pensions also said that they believed its current charge structure would mean that those with larger pension pots are not overly subsidised with smaller pots.

However, Boulding did admit that “for those who leave the scheme when they change job, there is a risk that their pot will be eroded by charges”.

He added: “We recognise this risk and therefore encourage leavers to consider consolidating their pension funds as it may be more cost-effective. We do not charge for transfers into or out of the scheme.”

It was announced last week that The Cardano Group had reached an agreement to acquire 100 per cent of Now Pensions from Danish pension fund Arbejdsmarkedets Tillaegspension.

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