Some employers and scheme members are being hit with charges of up to 9 per cent on occupational plans, a Department for Work and Pensions report reveals.
The report on charging levels and structures in money-purchase schemes, published last week, shows that two trust-based occupational schemes have AMCs of between 5 per cent and 9 per cent. This is up to six times the maximum stakeholder charge.
Three schemes have AMCs of 4-5 per cent, two have AMCs of 3-4 per cent, another two have AMCs of 2-3 per cent and 12 have AMCs of 1-2 per cent.
The vast majority of contract-based schemes have an AMC of less than 1.5 per cent. The DWP found charges were paid by the employer in 42 per cent of cases while employees paid the costs in 19 per cent of schemes. In 35 per cent of cases, the scheme charge was shared.
Standard Life head of pensions policy John Lawson says: “Some employers and scheme members are paying extortionate charges. They need to find a more cost-effective alternative.”
Hargreaves Lansdown pensions analyst Laith Khalaf says: “You can see how charges on occupational schemes rack up because they need to pay trustees, investment managers, actuaries and advisers rather than buying an off-the-shelf group personal pension.”