Costs and charges for members of The People’s Pension

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.

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.