Pensions - Articles - Pension charging structures and beyond


The Pensions Policy Institute (PPI) is publishing Pension charging structures and beyond; an outcomes-focused analysis sponsored by Smart Pension.

 The success of automatic enrolment has seen significant expansion in the numbers of people saving into workplace pensions, and the introduction of the charge cap on default schemes has focused attention on charges, transparency and value for money. This report examines the extent to which charging structures affect savers’ retirement outcomes and what more could be done to aid people have a retirement outcome that meets their needs.

 Mark Baker, Senior Policy Researcher at the PPI said “Charging structures and levels do have an important role to play in determining savers’ retirement outcomes, but they should be understood alongside a number of other factors, such as contribution levels, investment strategies, the impact of accumulating multiple pots, the strength of governance oversight and member communications and experience.”

 “A charging structure that appears to offer a low charge for savers does not guarantee good value, as other factors, particularly investment performance, increased personal contributions and member engagement will affect outcomes. Automatic enrolment has two unique features that can work against savers achieving optimal outcomes. The first is that members do not have always influence over the scheme their employer elects to enrol them into, and the second is that they are likely to approach retirement with multiple pension pots accrued across different employers and schemes. Moving between different charging structures during accumulation will have an impact on retirement outcomes. There are potential approaches that can assist savers optimise the value of their pensions, such as retaining the same pension throughout their working lives or taking their pot with them when they move between employers. However, none of these strategies will guarantee better outcomes alone.”

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