The People's Pension, West Sussex, England, a U.K. multiemployer defined contribution plan sponsored by B&CE, will reduce fees as the savings level increases of workers enrolled into the plan, according to a statement Thursday.
Going from a standard management charge of 0.5% to as little as 0.2%, the £5 billion ($6.4 billion) retirement plan provider wants to encourage its participants to save more toward retirement.
An inversely proportional fee structure means that an annual fee will gradually fall as a participant's retirement savings grow. A lifetime fee could fall by more than half to just 0.23% under the new structure and increase the total savings at retirement by almost £55,000, which People's Pension estimates could translate to an additional three years of retirement income.
"Charges can eat away at pensions, and on a flat-rate, percentage fee, savers pay a lot more in pounds and pence the more they save," said Patrick Heath-Lay, CEO of B&CE said in a news release. "We're reducing members annual charges as a percentage of their savings in line with the growth of their pot, potentially boosting their retirement income by thousands."
Mr. Heath-Lay called on other providers of DC plans in the U.K. to adjust their fee structures. "We're taking this approach further by offering all members the same clear incentive to save for the long term. We urge the industry to follow suit," he said.
Participants will see the changes to their fees via an online account effective in the summer.