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Now: Pensions responds to charges criticism

Now: Pensions responds to charges criticism

Now: Pensions has defended its charging model after criticism from Labour MP Steve McCabe, who alleged the provider’s structure had "eaten away the entire pot of some of their customers".

Mr McCabe, member of the Work and Pensions select committee, said at a hearing in Parliament earlier this month (February 6) that Now: Pensions had a charging structure where they charged a £1,50 admin fee per month per member on top of a 0.3 per cent annual management charge.

He questioned the Financial Conduct Authority (FCA) on the matter but the regulator referred him to The Pensions Regulator (TPR).

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In a letter to Mr McCabe published yesterday (February 18), Adrian Boulding, director of policy at Now: Pensions said the provider had spent a lot of time thinking how to structure its member charges "so that they are simple, transparent and fair".

Most pension providers charge a flat annual management charge based on a percentage of the fund, he noted.

By separating the fees, "it is clear to members how much they are paying for investment management and how much for scheme administration and communication," Mr Boulding said.

"It also means that those with larger pension pots aren’t overly subsidising those with smaller pots," he added.

Despite recognising the average pension pot at Now: Pensions remained small, currently about £500, and that there was a risk for members who changed jobs that their "pot will be eroded by charges", Mr Boulding said in the long run, it would lead to more valuable pots.

He said: "Structuring our charges in this way rewards long-term saving as we hope the vast majority of our members, like us, are in it for the long haul."

Mr Boulding also said the provider encouraged members changing jobs to consider consolidating their pension funds as it may be more cost-effective, and that Now: Pensions doesn’t charge for transfers into or out of the scheme.

He added Now: Pensions was part of a group working within the Pensions and Lifetime Savings Association (PLSA) looking at how the issue of multiple small pots can be addressed.

He said: "We find we are uniquely placed to lead the thinking in this area, as we are clearly seeking solutions in the interests of our own members, not for our own commercial benefit."

Last week it emerged investment firm Cardano has agreed to acquire the provider for an undisclosed sum.

Meanwhile Now: Pensions, currently owned by Danish pension fund ATP, recently announced it has resolved its historic administrative issues with the regulator.

A year ago, the provider received a £70,000 fine from the watchdog due to problems with collecting contributions, and its failure to communicate these problems to members.