The People’s Pension is calling for other large AE providers to adopt a ‘single pot’ approach, to help reduce the proliferation of pensions people have and reduce overall charges.
The master trust provider, which has 6.4m members, claims it is the only provider to offer this approach. This means workers who switch jobs, but then join a different employer using same master trust would retain the same single pot – rather than have a separate account, potentially with a different charging structure.
For example, The People’s Pension say if a member joined its master trust through an employer’s scheme with a base charge of 0.3%, left the scheme and then later returned with another employer on 0.5% charge, the member would continue to pay a base charge of 0.3% on all their savings.
The People’s Pension says this is becoming more important with the average worker now having 11 jobs during a lifetime. As a result it is not uncommon for savers to end up with more than one pension pot with the same provider. This issue is likely to become more common as consolidation continues in the master trust market.
The People’s Pension analysis shows that a saver with £100,000 split between two pots with a provider which does not offer this approach could pay more than £11,000 more in charges over the course of 20 years.
The People’s Partnership, CEO Patrick Heath-Lay says: “As an organisation that is committed to helping its members build financial foundations for life, our members benefit from having one pot with a best price guarantee, meaning that, not only do they pay just one set of charges, but they also have a better chance of receiving a rebate on the charges they pay.
“There are very real examples of savers who have multiple pension pots with the same provider, who are paying significantly differing charges for the same product. We believe that if other pension providers are really serious about putting the needs of their customers first, they should introduce the single pot model and ensure that individuals pay the lowest rate of charges available to them.
This would also go some way towards reducing the number of small pots that are currently in circulation.”
