Leading UK master trusts have hit out at a cost analysis from NOW: Pensions that claimed it was the lowest-cost auto-enrolment provider on the market.

The provider – which runs more than £1.3bn (€1.4bn) in defined contribution (DC) assets – published a press release last week in which it stated that its charging structure would have the lowest effect on members’ savings over a 20-year period, compared with seven other providers.

The analysis was based on a hypothetical pension fund member earning £28,000 a year – the average wage in the UK. Over 20 years saving 8% of salary, the auto-enrolment minimum, NOW: Pensions assumed 2.5% annual wage growth and a 5% annual investment return.

After two decades saving with NOW: Pensions, the member would have accumulated more than £73,000 and paid £2,956 in charges, the provider claimed. It charges 0.3% a year plus a £1.50 per month administration fee.

In contrast, NOW: Pensions’ analysis showed that Smart Pension’s 0.75% annual charge would mean the member would pay £6,636 in fees and accumulate just over £70,000.

Adrian Boulding, director of policy at NOW: Pensions, said the “auto-enrolment cost comparison index” showed the “devastating effect” of fees.

“We hope our analysis will encourage employees to shop around for the AE provider that suits them best and look at fee structures over the long-term to ensure they are getting the most out of their hard-earned money,” Boulding added. “We also recommend that all savers consolidate their funds, to benefit from economies of scale where providers offer these.”

Backlash

However, the analysis prompted stinging criticism from some of NOW: Pensions’ rivals named in the analysis.

A spokeswoman for Smart Pension said: “This is an artful piece of propaganda taken at such an acute angle so as to throw the best possible light on NOW: Pensions – and it should only be viewed from this perspective.

“If you look at any piece of recently published independent performance analysis, net of fees, NOW is firmly at the bottom.”

Romi Savova, CEO of PensionBee – which NOW: Pensions claimed was the second most expensive provider on the market – also criticised the analysis, highlighting that PensionBee was not an auto-enrolment provider.

Savova added: “It is absurd for NOW: Pensions to suggest they are a cost-effective pension provider, and the wider industry response to their auto-enrolment cost comparison index demonstrates this.”

Citing a letter sent earlier this year to the UK parliament’s Work and Pensions Select Committee, she argued that NOW: Pensions “routinely erodes the value of their members’ pensions to £0 – an outcome that is inconsistent with the objectives of auto-enrolment”.

Frank Field, chair of the committee, wrote to NOW: Pensions’ Boulding on 22 February asking how many of the master trust’s members had experienced “costs higher than returns”, and how many had savings of more than £4,000.

NOW: Pensions has yet to respond publicly to the questions.

The provider is currently waiting for the results of its application for authorisation from the Pensions Regulator. It received an extension to the 31 March 2019 deadline for submitting its application following its acquisition by Cardano in February.

NOW: Pensions is the pension provider for IPE International Publishers.

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