Several pension providers have criticised an index that is said to reveal the best and worst providers in the industry in areas such as pension transfers, annual charges and exit fees.

PensionBee’s third annual Robin Hood Index has ranked Now Pensions as having the highest annual charges across the industry, with an average annual charge of 62.1 per cent. Its methodology involved adding up all the fees, such as fund fees, fixed based fees, and other policy fees that may apply.

“In the case of Now Pensions, a £-based fee of £18 (in addition to a %-based fee of 0.3 per cent) is applied to fairly small pension values (approximately 40 per cent of the pensions in the sample of 91 were below £100). The result is a high charge as a proportion of the pension pot. Currently, these charges are permitted by the Department of Work and Pension’s charge cap legislation,” Pension bee stated.

However, Now Pensions has branded the analysis as “inaccurate and misleading” and said they are based on 92 people with very small pots, transferring out, something that Now Pensions suggests they do.

“As members continue to save with us and as auto-enrolment minimum contributions increase, the charges as a proportion of their pension pot will reduce. The dual charging structure is very cost effective over the longer term,” Now Pensions stated.

Now Pensions also argued that one of PensionBee’s fund options, the ‘Future World’, has higher charges than Now Pensions, and the ‘Tracker’ option becomes less expensive than Now Pensions once the pot size exceeds £964,000, which is close to the lifetime allowance limit.

The analysis from PensionBee also looked at DC transfer times from a sample of 7,292, from one DC provider to another, revealing that Xafinity takes on average 52 days. Now Pensions came second worst with 45 days, Mercer 44 days, Willis Towers Watson 41 days and Aon Hewitt with 41 days.

However, XPS Pensions Group co-CEO Paul Cuff said that having looked at the research, the figure relates to six individual transfers, “each with its own characteristics”.

“Around half of the time between initial contact and the transfer being paid the process was out of our hands – for example, members choosing what to do once in receipt of a quote. We are dedicated to improving member outcomes and are supportive of what PensionBee are trying to achieve in terms of raising standards, but care needs to be taken on research like this when the sample size for our firm is so small,” he said.

In addition, Willis Towers Watson head of technical pension administration operations, Brendan Mooney, said: “As we have said previously, the defined benefit and trust-based defined contribution pensions that we administer can take longer to transfer than some other DC pensions – for example, because assets are held by third-party investment managers and not directly controlled by us. In addition, some of the pension schemes we administer are decades old and do not have electronic records of members’ entitlements so a high level of investigation and digitisation can be required.

He added that its transfer procedures comply with The Pensions Regulator and Financial Conduct Authority guidelines on protecting members from pension scams.

“Finally, we would make the observation that the measure should be applied between the date the transferring arrangement dis-invests a member’s assets to when the transfer payment is passed to the new provider. In this respect, Willis Towers Watson would normally be in line with the contract-based providers quoted in the article. For these reasons we do not think that this research compares providers in a like-for-like way, or provides an accurate assessment of the market,” he added.

In response to its slow transfer times, a spokesperson for Now Pensions said: “Due to delays processing contributions for some of our members, in the past year, transfers have taken longer than we’d like in some cases. Last year we adopted the Origo service for transfers both into and out of the scheme and once all member accounts are up to date the transfer process should speed up.”

A statement from Mercer said it is "proud of the quality of our administration and we do not believe the league table provides an accurate reflection of Mercer’s performance compared to Pension Bee (or other similar providers that only accept DC transfers)".

"Without understanding the samples used, the research may not be comparing apples to apples. It is interesting and, we think, pertinent to note that in this research, the slowest are third-party administrators of predominantly trust-based occupational pension schemes, while the fastest are insurers of predominantly individual pension policies."

The Robin Hood Index also found Phoenix Life to have the biggest exit fees across the industry. It found the biggest charge to be £12,245 from Phoenix Life, which also had the top five highest exit fees.

In response, a Phoenix Life spokesperson said: “PensionBee publishes these reports every year and we are never privy to the data they are basing the findings on. We are therefore unable to confirm if the exit charges quoted are correct. The report lists MVRs as exit charges, which they are not. They are in place to ensure policyholders take a fair proportion of the fund when they exit and policyholders that remain are not penalised.

“Phoenix has significantly improved the financial position of its many with-profits funds (to the extent that 75 per cent of our with-profits policies are now paying an annual bonus again and very few policies have an MVR applied on early exit), however in some cases, the combination of generous guarantees and low investment returns over a significant portion of the policies’ lives means that market value reductions must be applied. If PensionBee could share the details of the cases they list, we could double check if the figures are correct. We are pleased to see that PensionBee acknowledges the work we have undertaken to improve pension transfer times.”

However, PensionBee has defended its research, and with regards to Willis Towers Watson said that many administrators use third-party investment managers and it is not aware of other instances where this impacts transfer times.

"That some pension scheme records are decades old should be a priority for Towers Watson to fix. We live in a digital age and customers expect a digital level of service from their providers. There are electronic transfer services like Origo Options, which are much safer for members than sending around paperwork with bank details in the post," PensionBee stated.

Although it recognises Xafinity's comments, it argued that even including a larger sample size of 20 (i.e. going back a slightly longer period), their average transfer time is 42.4 days. PensionBee has also engaged in a Twitter war with Now Pensions over its annual fund charges.

With regards to Phoenix Life, a spokesperson for PensionBee said: "We strongly disagree that MVRs are not exit fees. Exit fees are the difference between fund values and transfer values and their main effect is to prevent switching. Phoenix Life is in a minority of providers who still levies these forms of fees. Even though they exist due to legacy reasons, that does not make them fair to the customer. We hope the FCA’s ongoing investigation into effective competition in non-workplace pensions will focus heavily on MVRs and their negative impact on switching.

Aon declined to comment.

Share Story: