Briefing Notes

Briefing Note 33 - How important are low charges in Personal Accounts?

The Government believes that it is critical that charges for personal accounts are maintained at as low a level as possible. A low charge is seen as necessary to allow auto-enrolled members to get as high a pension income as possible.

This Briefing Note looks explores low charges and other factors that will affect the final amount of income that Personal Accounts will deliver including investment returns, employer contributions and pension credit. It finds that while having a low charge would, all other things being equal, undoubtedly give a better pension income than a high charge, the difference between a charge of 0.3% and, say 0.6% is not so large that it should be the critical factor. The impacts of investment returns and the employer contribution, and the potential impact of Pension Credit, could be more significant for pension income from a Personal Account than the impact of a very low, rather than low, charge.