PensionBee accuses Now Pensions of ‘misleading’ govt over charging structure

PensionBee has accused Now Pensions of “attempting to pull the wool” over the government’s eyes in regards to its charging structure.

In a letter to Steve McCabe MP, PensionBee CEO, Romi Savova said that she was “deeply concerned” that the Now Pensions charging structure allowed small pension pots to be “extinguished” by the charges.

Responding to the criticism, Now Pensions said that its charges were “entirely transparent and amongst the most competitive in the market for longer-term saving”.

On 7 February, Now Pensions director of policy, Adrian Boulding, responded to concerns raised at the Work and Pensions Committee’s evidence session with the Financial Conduct Authority with a table detailing its charging structure.

Replying to Boulding’s letter on 22 February, Works and Pensions Committee chair, Frank Field, said the table “highlights well the likely benefits of your charging structure”.

However, Savova stated that she feared that Boulding’s claims of the long-term cost efficiency of Now Pensions’ cost structure were “misleading”.

She explained: “Mr. Boulding has presented you with a set of assumptions that are likely inconsistent with the reality of the Now Pensions member base.

“If Mr. Boulding’s assumptions were correct, the average Now Pensions pension would likely be over £2,000. One can apply a simple mathematical calculation that shows if Mr. Boulding’s assumptions were reflective of reality, just the value of the first year’s contribution would be £2,000.

“Even taking into account the staging of auto-enrolment contributions, a 5% contribution rate would imply £1250 of first year contributions, which is substantially higher than the average pot of £500 (a figure which Mr. Boulding has articulated is the average size in his letter).”

Savova claimed that it would therefore be “likely” that the average salary of a Now Pensions member would be “substantially lower” than £25,000, meaning that lower income members were more likely to have their pension pots “extinguished”.

Furthermore, she claimed that the average Now Pensions member was switching jobs more frequently than it had anticipated and the “erosive nature” of its charging structure had “taken its toll on a substantial number” of Now Pensions members.

She also said that there was an “unacceptable level of risk” that many of the pensions in the Now Pensions scheme would “continue to be eroded to zero by charges”, and highlighted that Now Pensions does not allow members to make contributions to their pot once they leave their employer.

In response, Now Pensions stated: “By structuring the charge in this way, we believe it is clear to members how much they are paying for investment management and how much for scheme administration and communication.

“For those who leave the scheme when they change job, there is a risk that their pot will be eroded by charges. We recognise this risk and therefore encourage leavers to consider consolidating their pension funds as it may be more cost-effective.”

This is not the first time PensionBee has come to blows with Now Pensions, after Now Pensions labelled PenionBee’s analysis on pension providers as “inaccurate and misleading” in August 2018.

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