What are People’s Pension’s fees and charges?
Understanding the fees and charges in your pension plan is essential. These costs can impact how much money you’ll have for retirement, so it’s crucial to know what you’re paying and why. Here, we’ll look at the fees People’s Pension charges and how they affect your pension savings.
What Are Pension Fees?
Pension fees cover the costs of administering your pension, investing your money, and providing member services. Every pension provider has a slightly different fee structure, so understanding these charges can help you make an informed choice.
People’s Pension’s Fees Explained
People’s Pension refers to its fees collectively as a ‘member annual management charge’, which is made up of several parts:
Annual Charge
A £4.50 annual charge is deducted from your pension pot each Scheme year, if your pot is £104.50 or more.
Management Charge (0.5%)
You’ll pay 0.5% of your pension pot’s value each year.
Management Charge Rebate
If you have more than £3,000 in your pension pot, you’ll receive a partial refund (rebate) on the 0.5% management charge, between 0.1% and 0.3% depending on how much is in your pot. This is calculated on the portion of your savings above each threshold:
Up to £3,000: no rebate
Over £3,000 and up to £10,000: 0.1%
Over £10,000 and up to £25,000: 0.2%
Over £25,000 and up to £50,000: 0.25%
Over £50,000: 0.3%Impact on Your Pension Savings
Transaction Costs (around 0.09% per year for the Default Arrangement)
These are costs the pension scheme incurs when fund managers buy and sell investments. They may vary over time.
Impact on Your Pension Savings
Although fees reduce the amount you have in your pension, they also pay for professional fund management and administration, which can help grow your retirement savings over time.
Let’s take an example:
Suppose you already have £10,000 in your People’s Pension pot.
Over one year, you contribute £1,000 (this includes any employer contributions and tax relief). There’s no separate contribution charge, so the full £1,000 goes into your pot.
You pay a £4.50 annual charge (assuming your pot is at least £104.50).
You also pay a 0.5% management charge on the £10,000, which is £50 for the year.
Because your pot is over £3,000 (and up to £10,000), you’ll get a 0.1% rebate on that portion of your savings. On £10,000, that’s £10 refunded. So, effectively, you’re paying £40 on top of the £4.50 annual charge.
Transaction costs, averaging 0.09%, would also apply to the fund’s investment activities, amounting to about £9 on a £10,000 pot (though these costs can vary).
While these fees and costs may seem small, they can add up over time—so it’s essential to compare fees across different providers and assess their long-term impact on your retirement savings.
Are These Fees Right for You?
When choosing a pension scheme, consider how the fee structure fits with your retirement goals. If your pot is growing or you’re contributing regularly, look at how the rebates might offset your management costs once your pot exceeds certain thresholds.
Things to Consider
Before you decide whether People’s Pension is the right option, it’s worth comparing fees, benefits, and any additional services against other providers. Small differences in charges can add up significantly over the years, influencing how much you’ll have for retirement.
Check the flexibility of the scheme (e.g., transferring in or out).
Look at the fund choices and investment performance.
Consider your personal situation and retirement timeline.
Check whether the features of People’s Pension’s platform, website, and app give you sufficient access to, and control of, your pension savings.
Where to Find Out More
For free, impartial information about pensions, including fees, visit MoneyHelper. If you need more tailored guidance, you could consult an independent financial adviser, though be aware there may be a cost for their services.
Historically, the pensions industry has been known for complex, hidden fees. Unfortunately, many providers still make it very difficult to find out exactly what you’re being charged. At Penny, we’re on a mission to make it super-easy to understand and manage your pensions. We bring all your retirement savings into one place and give you clear insights into fees and charges so you can make confident decisions.
