TPP introduces annual £2.50 charge to 'futureproof' scheme

The People’s Pension (TPP) will introduce a combination charge structure, which it says will make it “fairer and futureproof” against the impact of the Covid-19 pandemic.

The auto-enrolment provider will bring in a £2.50 annual management charge, which will be deducted from all members later in the year, is intended to cushion the effect of market volatility on scheme revenues.

The new combined annual management charge will consist of the £2.50 charge, the pre-existing 0.5 per cent management charge and a newly structured rebate on the management charge.

This rebate can stretch from 0.1 per cent on savings of between £6,000 and £10,000, to 0.3 per cent on savings of over £50,000.

Later in the year, savers can expect a rebate on savings of over £3,000, which TPP said will make an extra half a million people eligible for a rebate.

The company added that the new structure would reduce the cross subsidy by active members of millions of small, inactive pots, which are often created by auto-enrolment.

As an example of how the new charge structure will work in practice, TPP said a member on a salary of £20,000 with an initial pension pot of £3,000 could pay the equivalent of 0.3 per cent in total annual management charges over twenty years.

B&CE chief executive, Patrick Heath-Lay, said: “As we evolve our charging approach to meet changing requirements, we think this approach combines fairness, incentives to save, and prudence.

“Our modified charging structure cuts fees as members save more, reduces the cross subsidy from actively saving members to inactive small pots, and futureproofs revenues against the unpredictable financial impact of COVID-19. These changes ensure we offer fantastic value for money to active savers of all types.”

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