Costs and charges top driver of pension provider selection


Nearly two-thirds (65%) of pension scheme members cited the level of costs and charges as the most important factors for employers when choosing a pension provider, according to research by the National Association of Pension Funds (NAPF).

Its What do pension scheme members expect of how their savings are invested? research, which surveyed more than 1,000 occupational pension scheme members, found that 53% would prefer their employer to choose a pension provider that demonstrates strong stewardship activity in the long-term futures of organisations it is invested in, even if it is more expensive.

The research also found:

  • 60% of respondents would be interested in their provider undertaking stewardship activities.
  • Only 17% would want their employer to chose a pension provider that invested without taking a stand on an organisation’s long-term future.
  • 39% of respondents do not know how their pension savings are invested.

Respondents also had a clear interest in knowing more information about where savings might be invested, with 65% interested in knowing about asset allocation.

This is followed by interest in industries and sectors (63%), countries (65%) and specific organisations (63%) that individual savings might be invested in.

Will Pomroy (pictured), policy lead for stewardship at the NAPF, said: “Rightly, there has been considerable attention recently on the level of costs and charges within defined contribution (DC) schemes.

“However, this research raises an important question for those at every stage of the investment chain about whether the definition of ‘value’ is too narrowly viewed, and being defined without the input of scheme members?

“It is noteworthy that, despite low awareness among consumers of where and how their pension assets are invested, there is an evident latent interest in knowing more.

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“Given the clear preference of scheme members for their employers to favour providers with strong stewardship offerings, it is critical they are able to have confidence they are being enrolled into schemes that provide value for money and are equipped to act as good stewards of their pension savings.

“More than 70% of members of workplace DC pension schemes invest via the default fund. As such it is crucial that the increasing understanding of the long-term benefits of effective stewardship and the preference of members for this approach is properly considered in the context of the default fund.”