TPP plans fee reduction

The People's Pension (TPP) has announced plans to cut fees in a move that could result in people saving thousands of pounds more towards their retirement income.

Due to the progress of auto-enrolment and with contributions set to rise to 8 per cent from April 2018, TPP will move from annual management charges of 0.5 per cent to a banded pricing structure.

Member charges “as a percentage” will decline as their pension pots increase, “giving them a long-term incentive to stick with auto-enrolment saving” and encourage members to consolidate multiple pots.

According to TPP, the new pricing structure will immediately reduce the fee revenue TPP receives from its annual management charges by 10 per cent.

Commenting on the announcement, Pensions Minister, Guy Opperman said: “With the completion of automatic enrolment and the next phase of contribution increases about to take place, I’m pleased to see TPP taking this action to improve value for money for its members. I’d encourage all firms to look at what they can do to ensure they keep delivering value as the amounts saved continue to grow.”

The workplace pension provider revealed that an individual saving with TPP for their working life would see their lifetime annual management charges fall to 0.23 per cent with its new cost structure.

This would result in an extra £55,000 in their pension pot compared to charges of 0.75 per cent, and almost £30,000 in comparison to TPP's current rate of 0.5 per cent.

Under TPP's new structure, members would be paying an annual management charge of 0.2 per cent once they have saved over £50,000 with TPP.

B&CE CEO, Patrick Heath-Lay added: “Providers need to respond imaginatively to ensure auto-enrolment is attractive over the long-term, rewards people for saving and incentivises the consolidation of multiple pots.

“Charges can eat away at pensions, and on a flat-rate, percentage fee savers pay a lot more in pounds and pence the more they save. We’re reducing members annual charges as a percentage of their savings in line with the growth of their pot, potentially boosting their retirement income by thousands.”

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