Company DC scheme rip off??

DDS958

Hi,

I'm looking for some advice regarding my company DC pension. When I joined the company a few years ago they were in the process of introducing a new DC scheme, of which I was one of the first participants.

The scheme was advertised as a 2:1 company match, i.e. I pay 4% and my employer pays 8%. The pension provider is to take a 4% 'management fee'. I took this to mean that the pension company takes 4% of the account balance per annum, like a typical AMC (still ridiculously high). However, it turns out their 4% fee would be 4% of my gross salary! Of the 12% combined that went into my pension pot, the pension company took a third (33%) of the amount for a 'management fee'.

I queried this several times with my employer who assured me it was correct. After the scheme had been running for three years, I received a letter telling me the charges have changed and now the pension company take an AMC of around 0.75-1.25% depending which funds we have chosen. The whole 12% goes into the pension pot as it should do.

My question is should I be trying to reclaim the first three years of charges. It seems like they made a monumental error and made a drastic correction once they realised. Or is it normal for a pension company to take such a huge cut of peoples contributions? Ever?!

I hope this post makes sense. Thank you in advance for any help

mrschaucer

Can't advise you apart from suggesting forensically reading everything you can get your mitts on regarding the pension scheme. Just sympathising because it sounds absolutely ludicrous!

quotememiserable

The pension ombudsman would be a good place to start. No need to tackle something that crazy on your own.

dunstonh

The pension provider is to take a 4% 'management fee'. I took this to mean that the pension company takes 4% of the account balance per annum, like a typical AMC (still ridiculously high).

No. That would likely be an initial charge on contributions. Not an annual charge. Don't assume on these things. Look at the factual information. We cant see the paperwork so we have to suggest or guess. You have the paperwork. You dont need to suggest or guess.

However, it turns out their 4% fee would be 4% of my gross salary!

How do they get access to your salary? You would expect it to be 4% of the pension contribution and they collect it as you make contributions.

Of the 12% combined that went into my pension pot, the pension company took a third (33%) of the amount for a 'management fee'.

Are you sure?

My question is should I be trying to reclaim the first three years of charges. It seems like they made a monumental error and made a drastic correction once they realised. Or is it normal for a pension company to take such a huge cut of peoples contributions? Ever?!

I suspect you have some misinformation on the charges. 4% initial against contribution would not be unusual for pre 2012 cases (upto 5% was normal depending on how far back they set it up). 4% charge against salary is unheard of. Are you mixing up the 4% initial charge with the 4% personal contribution?

DDS958

Yes, I have double checked the paperwork and it lists it like this:

Employee contribution: 4%
Employer contribution: 8%
Gross: 12%
Management fee: 4%

Net contribution: 8%

I have also cross referenced my payslips from this three year period against my pension contribution statement. And yes, one third of gross contribution never makes it to my pension pot.

Thanks for the initial responses. I can tell already that this must have been wrong. I will contact the pensions ombudsman. Any other places that might be able to help?

DDS958

And yes, the three year period was mid-2009 - Apr2012

xylophone

https://www.pensionsadvisoryservice.org.uk/pension-problems/making-a-complaint/how-we-can-help

dunstonh

DDS958 wrote: »

Yes, I have double checked the paperwork and it lists it like this:

Employee contribution: 4%
Employer contribution: 8%
Gross: 12%
Management fee: 4%

Net contribution: 8%

I have also cross referenced my payslips from this three year period against my pension contribution statement. And yes, one third of gross contribution never makes it to my pension pot.

Thanks for the initial responses. I can tell already that this must have been wrong. I will contact the pensions ombudsman. Any other places that might be able to help?

If you have an IFA they will be able to help.

My gut feeling is that the 4% will be an initial charge against the contributions made. The period in question still allowed initial charges like that open ended. And seeing figures upto 5% was very common.

For annual charges, figures (from that period as today is cheaper) tended to be no more than 2.5% with most paying around 1%. Seeing a figure of 4x the typical seems unlikely. Theoretically possible but unlikely.

jamesd

It really seems most likely that it was supposed to be 4% of the amount paid in and someone on payroll screwed up. But a third of the amount paid in might be used if the employer was making the employees pay for services provided to the employer when recommending which scheme to use and setting it up. That sort of charge isn't allowed any more.

The paperwork you originally got should be specific. If it really does say 4% of pay then I think it's allowed.