Costs and charges for members of The People’s Pension

The Trustee and Administrator refer to this as the member annual management charge, which is made up of:

1. An annual charge of £4.50 on members’ pots of £104.50 and over, deducted during the Scheme year.
2. A management charge of 0.5% of a member’s pot each year.
3. A rebate on the management charge, for savings over £3,000.

The Trustee confirms that the Scheme’s member annual management charge is comfortably within the Government charge cap for schemes with combination charges. The Scheme can charge a maximum of £10.00 or less per year as a flat fee charge, as well as a maximum of 0.6% of funds under management.

Considering the breadth and quality of the Scheme’s core service elements (investment, administration, communications, governance), the Trustee is satisfied that the costs and charges are appropriate for the Scheme both as a whole and compared to other options in the market. The Trustee believes the Scheme represents good value for members.

The Trustee reviews the transaction costs associated with the investment funds used by the Scheme at least annually, and most recently at the 2 August 2024 (previously 4 August 2023) Trustee Investment Committee meeting. Transaction costs result from buying, selling, lending or borrowing of investments. They’re part of the overall costs borne by members, as they have the effect of reducing the funds’ net investment returns.

Transaction costs are incurred by pension schemes in 2 ways. Firstly, a fund manager will trade in markets to invest money flowing into or out of a fund (when Scheme members contribute to or leave a fund). Secondly, they will implement investment decisions in the course of day-to-day management to achieve the fund’s objectives.

Transaction costs can be broadly broken down into explicit and implicit costs. Explicit costs are observable and, where the costs are incurred, an invoice could be generated. Examples include brokerage fees, stamp duty and custodian fees, and foreign exchange levies.

Implicit costs form part of the overall transaction costs that members pay. Implicit costs can’t be directly observed or invoiced. These include bid/offer spreads, implementation shortfall (the difference between the decision price and the execution price of a trade) and market impact (the change in the price of a security caused by the trade). Implicit costs will use a ‘slippage cost’ methodology to calculate the market impact of trading. This method calculates the trading cost by comparing the price at which the transaction was actually executed with the price when the order to transact entered the market. Implicit costs can be positive or negative depending on whether market movements were favourable or not.

The average transaction costs over the five years to 31 March 2024 are shown in the table below. The transaction cost data was provided by the Scheme’s investment manager, State Street Global Advisors, and prepared in line with statutory guidance. All transaction cost information required was received and is reflected in the figures tabled below.