Automatic enrolment provider Now: Pensions has come under fire for hitting employers with an exit fee if they choose to switch to a different scheme within two years.
Under scheme rules in place since it launched in 2012, employers who decide to switch provider within the first 24 months have to pay a fine depending on their size.
A spokeswoman would not reveal how break fees are calculated but said they are “typically around £500”.
She says: “It is designed to recover set-up costs if the contract is terminated within two years.
“The level of the fee is proportionate to the size of the employer, with small employers paying less than large employers, due to the differing levels of work involved. It is clearly explained and entirely transparent.”
Rival mastertrust The People’s Pension and Government-backed Nest confirmed they do not impose exit fees on employers.
Pension PlayPen founder Henry Tapper says he was unaware of the exit fee and that it would have a “material impact” on the provider ratings his firm maintains.
He says: “£500 is nothing at all for those employers who have staged up until now, but it is a very high price to pay for a false start for SMEs and micro companies.”
He adds: “It would impact upon our employer support rating, it’s an important thing to know about.”
Rowley Turton director Scott Gallacher says: “Now: Pensions seems to be shooting itself in the foot repeatedly.
“There’s a capacity issue so it’s a shame and if they have to have it they need to be upfront about it. If this fee is buried in the terms and conditions that’s hardly transparent.”
Last year, Money Marketing revealed how 200,000 savers were hit with a Christmas “blackout” as a result of Now: Pensions switching admin providers.