Fintech consolidator PensionBee has warned of "an unacceptable level of risk" that a large proportion of pots in Now Pensions will be eroded to zero by charges.
Last month the master trust, the third biggest in the market, defended its charging model after criticism from Labour MP Steve McCabe.
Mr McCabe, a member of the Work and Pensions select committee, said at a hearing in Parliament that Now Pensions had a charging structure where they charged a £1.50 admin fee a month per member on top of a 0.3 per cent annual management charge.
At the time, Adrian Boulding, director of policy at Now Pensions, acknowledged the provider's average pension pot was small, currently about £500, and that there was a risk that members who changed jobs would see their pot "eroded by charges".
But Mr Boulding said in the long run it would lead to more valuable pots.
In a letter sent to Mr McCabe, seen by FTAdviser and published by the committee, Romi Savova, chief executive at PensionBee, said she feared Mr Boulding’s comments were misleading.
She explained that according to Mr Boulding’s assumptions – with the average individual earning £25,000 and a likelihood of being an active member for 10, 20, 30 or even 40 years - the value of the first year’s contribution would be £2,000.
She said: "Even taking into account the staging of auto-enrolment contributions, a 5 per cent contribution rate would imply £1,250 of first year contributions, which is substantially higher than the average pot of £500."
Ms Savova feared the average salary of a Now Pensions member was substantially lower than £25,000, "meaning the probability of pension pots being extinguished disproportionately affects the lower income members of our society".
She also believed the numbers showed the average member was switching jobs more frequently than the master trust anticipated, and that the "erosive nature of Now Pensions charging structure has already taken its toll on a substantial number of the 1.6m members of the scheme".
Ms Savova said: "This is a structural flaw in the charging model that is at odds with the characteristics of the member base and quite simply unfair.
"We hope you will ask Now Pensions to act now in order to stop this injustice on lower income members of society."
A Now Pensions spokesperson refuted these claims, arguing its charges were "entirely transparent and amongst the most competitive in the market for longer term saving".
She said: "We have been proactive in sharing our charging structure in great detail with the Work and Pensions committee."
Regarding Now Pensions's fees, the spokesperson said: "Our charging structure is more competitive than a 0.75 per cent annual management charge at £4,000 and more competitive than a 0.5 per cent AMC at £9,000.
"For those who leave the scheme when they change job, there is a risk that their pot will be eroded by charges. We recognise this risk and therefore encourage leavers to consider consolidating their pension funds as it may be more cost-effective.