Simplify pension charges, say employers

MOST independent businesses would like to see all workplace pension charges set up under auto-enrolment as a capped, allin-one fee, says a study.

A survey of 300 small firm owners and managers turning over up to £5 million a year found that 83 per cent of them preferred the idea of a fixedcharge cap, which included all upfront and ongoing administrative costs and transaction charges, to battling with complicated upfront and ongoing variable charges.

The Government sets the charge cap and it applies to administration and investment costs on workplace pensions, while transaction fees from investment trading fall outside the cap and so can be added on.

While 41 per cent of employers said the charge cap was difficult to understand, 33 per cent said added costs were harder to budget for and 31 per cent said they were hard to keep track of. The Pensions Regulator expects more than 800,000 small firms to autoenrol staff over the next year.

Will Wynne, co-founder and managing director of master trust pension scheme Smart Pension, which conducted the study, said: ‘What the charge cap does and doesn’t cover is confusing and can be costly. In extreme cases, transaction costs can eat up over 10 per cent of contributions in the first year, while front-loaded costs penalise workers who have jobs lasting only a few years. Business owners were in favour of simplifying things.’