PensionsMay 15 2013

Auto-enrolment take-up rates at 90% – survey

Search sponsored by
ByIona Bain

In a survey of more than 90 per cent of FTSE 100 companies, the consultancy firm found that take-up rates were approximately 90 per cent.

The survey also found that 74 per cent of the direct contribution scheme members polled had an annual management charge of 0.4 per cent or less, a rise from 53 per cent in the 2012 survey.

Jamie Fiveash, director of customer solutions for B&CE, provider of the People’s Pension, welcomed the findings but stressed that reported AMCs do not always reflect the full charging structure of schemes.

He said: “Comparison is also made difficult where schemes have dual charging structures. For example, it is often quoted that the National Employment Savings Trust’s charges are roughly 0.5 per cent, but an individual has to a member of the scheme for nearly 20 years before they will reach this level.”

Mr Fiveash said the People’s Pension had an AMC of 0.5 per cent, equivalent to a total expense ratio, and was inclusive of all operating costs. He also questioned whether schemes would retain their current low charges, especially when auto-enrolment staging kicks in next year.

Mr Fiveash added: “The risk is that we could see an upward trend from this point, as providers may incur extra costs from initiatives such as pot follows member and defined ambition.”

Right to reply

Graham Vidler, director of communications and engagement for Nest, said: “For many types of Nest saver, our charges work out as broadly equivalent to 0.5 per cent AMC over their saving lifetime – a good ‘benchmark’ for low charges currently enjoyed by members of large workplace schemes. For periods when they are not contributing, that charge drops to 0.3 per cent AMC.”

Adviser view

Scott Gallacher, director of Leicestershire-based Rowley Turton IFA, said: “The picture of where we’re at now is artificial because larger companies were always going to be better at communicating changes and can benefit from economies of scale. The real test comes in a year’s time with smaller and medium-sized companies. Clients may end up with Nest, which might not be suitable for them, or nothing at all.”