Costs and charges for members of The People’s Pension

Find out what the costs and charges are for members of The People’s Pension, and find out what our Chair had to say about them in 2022’s annual report.

Member annual management charge

Every workplace pension scheme charges members for looking after their money. You might hear this called an ‘annual management charge’, ‘management charge’ or ‘AMC’ for short.

At The People’s Pension, we reduce the rate we charge members as their savings grow. Our charging structure is made up of 3 elements: an annual charge, a management charge based on the value of the member’s pension pot each year and applied on a daily basis, and a rebate on the management charge (depending on how much is in the member’s pot).

Transaction costs

Costs will also be incurred by investment funds when assets are bought, sold or lent by the fund. These are called ‘transaction costs’.

A member’s pension pot is indirectly affected by such costs as these reduce the net investment returns of the funds.

Chair’s annual governance statement on member costs and charges…

Mark Condron, Chair of The People’s Pension Trustee, gives an annual governance statement each year. The section about charges and transaction costs from his most recent statement (for year ending 31 March 2023) is included below.

For the full governance statement, download The People’s Pension Scheme annual report and financial statements.

Mark Condron

Member-borne charges and transaction costs

The Trustee is required to set out the on-going charges borne by members in this statement, which are annual fund management charges plus any additional fund expenses, such as custody costs, but excluding transaction costs.

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

  1. An annual charge of £2.50* on members’ pots of £102.50 and over, deducted during the Scheme year. The Trustee has agreed to increase the annual charge to £4.50 on members’ pots of £104.50 and over in the next financial 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.

*Please note, this information is for the 2022-23 scheme year. For the 2023-24 scheme year, the annual charge is £4.50.

Members can find out more about their exact charges in their Online Account. Once logged in, they’ll need to go to ‘Manage my pension’, followed by ‘Charges’.

The Trustee confirms that the Scheme’s member annual management charge is comfortably within the charge cap set out by the government for schemes with combination charges. The Scheme is permitted to charge a maximum of £10.00 or less per annum as a flat fee charge as well as a maximum percentage of funds under management rate of 0.6%.

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 when 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 4 August 2023 (previously 5 August 2022) Trustee Investment Committee meeting. Transaction costs are a component of the overall costs borne by members, as they have the effect of reducing the net investment returns of the funds.

Transaction costs are incurred by pension schemes in two 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 the 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 cannot be directly observed and cannot be 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 upon whether market movements were favourable.

The average transaction costs over the 5 years to 31 March 2023 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 accordance with statutory guidance.

Default arrangement: charges and transaction costs

The Scheme’s default arrangement is used by 98.61% of the membership.

FundManagement chargeTransaction costs
Global Investments (up to 85% shares) Fund*0.5%0.06%
Pre-Retirement Fund*0.5%0.04%

*These funds are also available as self-select options.

Non-default arrangements (self-select investment options): charges and transaction costs

The Scheme’s default arrangement is used by 98.63% of the membership.

FundManagement chargeTransaction costs
Global Investments (up to 60% shares) Fund0.5%0.05%
Global Investments (up to 100% shares) Fund0.5%0.06%
Ethical Fund0.5%0.01%
Annuity Fund0.5%0.01%
Shariah Fund0.5%0.01%
Cash Fund0.5%0.00%