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The Actuary The magazine of the Institute & Faculty of Actuaries

Big discrepancies in mid-sized pension scheme fees

Pension schemes are paying vastly different fees for the same levels of service and even with the same provider, according to a study by Atkin & Co.

This large discrepancy in fee levels appears to affect medium-sized pension schemes most, the firm says. Multi-national schemes can afford to pay premium fees and receive a priority service in general. They are also more likely to have regular fee and advisor reviews. However, very small schemes are restricted by what they can afford and often have no choice but to review and control fees as far as possible. It is the experience of schemes outside of these two extremes - those in the middle range - which varies to a surprising extent.

Marian Elliott, director at Atkin & Co, said: "There doesn’t seem to be any difference in service levels which would explain the discrepancy in annual running costs for these schemes. This seems to indicate that, for many schemes, fees could be reduced significantly by reviewing the fee structure, challenging advisors over the nature and extent of work that is being carried out, and conducting regular advisor reviews.

"This doesn’t necessarily mean changing advisors every few years, but it does mean testing the market so that trustees have a regularly updated yardstick with which to assess the annual fees being incurred by their scheme. A perhaps surprising side-effect of this sort of regular review is an improvement in advisor/client relations, as the advisors feel more engaged with their clients and have the chance to explain the rationale behind what they are doing and where they are adding value."