The insurance group's DC scheme has seen a reduction in investment fees of 20 per cent on one fund and a quarter on its AVC options
The scheme has also announced a 25 per cent reduction on charges for its two additional voluntary contribution funds, down from 1 per cent to 75 basis points.
Pearl Group's DC scheme in numbers
Number of members: 1,866Growth in assets in 2010/11: £5.1mLowest AMC: 10bp (L&G gilt fund)Highest AMC: 50bp (SLIM managed fund)AMC on default: 20bp (L&G equity fund)
Though none of the funds that are becoming cheaper for members are used as the scheme’s default option, the move will lead to lower investment costs for members.
There are growing calls from within the pensions industry for schemes to apply downward pressure on investment fees as over the long term high fees can erode members’ retirement savings.
The latest available figures for the Pearl scheme from last year’s annual accounts showed assets grew by £5.1m over the year and the membership stood at 1,866.
Pearl Group – which changed its name to Phoenix Group in 2010 – closed its defined benefit scheme to future accrual last year.
The scheme declined to comment on the changes, but a note to members stated: "The trustees regularly review the performance of the investment managers and also monitor the suitability of the funds for members."
Pearl’s reduced charges
Pearl offers its members eight different funds, plus two options that are available only for AVC members.
On October 25 the annual management charge for investing in one of the funds available to all members – the Henderson Global 50/50 Enhanced Equity Fund – will drop from 25bp to 20bp.
The fees charged on the scheme’s DC funds range from 10bp for a Legal & General 15-year gilt fund, to 50bp for the Standard Life Managed Fund. The latter is a multi-asset product with medium to high investment risk.
Pearl’s default option, the L&G World Equity Index Fund, has an AMC of 20bp.
The scheme also offers two higher risk funds to members of its AVC section, one which focuses on equities in the technology sector and another with an ethical investment approach.
Both these funds, which are also offered by Henderson Global Investors, have reduced their AMC from 1 per cent to 75bp.
A spokesperson for Henderson explained the reason for the reduced charges: “We reduced our fees based on the new clean-fee share classes available to advisers and platforms.
“These were put in place due to the change of rules on commission driven by the retail distribution review, which comes into effect next year.”
A Towers Watson analysis of FTSE 100 companies found 56 per cent of its schemes had AMCs of below 40bp, with just 6 per cent having a higher AMC than 1 per cent.
Appropriate DC investment fees
Earlier this year, schemeXpert.com conducted a survey of pension scheme attitudes to DC fund charges.
It revealed a wide range of opinions among scheme representatives over what was the most appropriate fee for a default option.
The majority felt the charge should be as low as possible, though there were also some survey respondents who felt higher charges could lead to a less volatile fund.
They argued members were often risk averse and therefore a low volatility fund would be the most appropriate option, even if it had a slightly higher charge.
The lowest default fund fee of those polled was 8bp and the highest was 65bp.
