Aviva has seen a 50 per cent increase in enquiries from unbundled workplace pension schemes considering moving to a bundled provider.
The provider says that unbundled to bundled enquiries are up by a half year-on-year in the period to 1 June 2019.
Aviva says the ending of short service refunds, which used to allow members of occupational pension schemes with less than two years qualifying service to get a refund on contributions, has led to an increase in the number of scheme members, causing administration charges charged on a per-member basis to rise.
Aviva head of workplace strategy Dominic Fryer says:“For a long time, the received wisdom was that once a defined contribution pension scheme had sufficient assets, the way to ensure the best member outcomes was to switch to an unbundled model. Times have changed however – bundled propositions have improved and traffic is no longer one way.
“The gap between unbundled and bundled member charges has been closing. Efficiency savings and a competitive market have driven down charges for bundled schemes. The differential is smaller than it has ever been.
“Trustees, or those with governance responsibility over an unbundled scheme, should also consider the lifetime charge on members’ pension pots – especially if drawdown isn’t an option within their scheme. The FCA found that charges for drawdown in retail products varied from 0.4 to 1.6 per cent per annum. As a member could be invested in a drawdown product for 25 years or more in retirement, they can easily undo the hard work of trustees who helped to minimise charges during accumulation.”
