New lower and capped management charges

Unlike the Aegon Group Personal Pension (GPP), which is product-based, whereby the running costs are bundled together to create a notional Annual Management Charge, the Workplace ARC is a trading platform that hosts / holds a range of investment “wrappers”, from pensions to ISAs and even individual shares.

In this way, costs to DAN Ltd pension scheme members are ‘unbundled’ (more transparent) on Workplace ARC, with the platform itself having its own cost and the funds chosen having their individual Annual Management Charges (AMCs).

We outline below the comparison in levels of management charges / costs between the previous GPP Scheme and the new Workplace ARC platform.
Further below, we show you how the total charges on the new Scheme are actually capped and we discuss below how this can work overall.

The current GPP member costs – these are as follows:

  • Aegon GPP base cost AMC of 0.25%*, plus
  • Plan Fee of £2.05 monthly

* the cost of the main Aegon ‘in-house’ funds & the Blackrock index tracker funds in the widest use.  The other externally managed funds will cost more than this, though do not form part of the advisory recommendations within the GPP structure.

The new Workplace ARC comparative costs – these are as follows:

  • ARC Platform Fee of 0.12%
  • Fund AMCs* either of 0.05% for Aegon AE Default Fund, or of 0.10% for Aegon ‘in-house’ funds & the Blackrock index tracker funds
  • Monthly Plan Fee of £2.05 remains

* representing the Default Auto-enrolment fund and purely the range of time-horizon-led, risk-rated portfolios as currently advised upon.  Again, other externally managed funds will cost more than this, as already mentioned.

At the Patterson-Mills portfolio-advised level, the above represents a reduction of over 10% immediately in total pension fund running costs, from 0.25% to 0.22%.

Cap on charges

This works by viewing the value of all investments, not only pension, that you may choose to hold on the ARC platform.  This could also include ISAs, for example and other investments you accumulate (or have accumulated and transfer onto the ARC platform) over time.

Once your funds in total – not only your pension fund – reach £250,000, the annual ARC platform charge of 0.12% becomes zero on all amounts above that value.

At this point, the annual running costs for all funds over and above £250,000 become only the Fund Charge and the Plan Fee stated above (that means the 0.12% is not applied on those funds over and above £250,000).
For example, this means that all fund types held above £250,000 incur purely:

  • the 0.10% per annum Fund Charge (e.g. using the Blackrock index funds that are currently recommended)
  • the Plan Fee at £2.05 per month.

Notwithstanding the fixed Plan Fee amount, once combined funds have grown the annual running costs based upon the Fund Charge with the Aegon Workplace ARC platform, as compared to the current Aegon GPP, are some 60% lower.

This is especially useful, given that the charge cap can be reached by having other, non-pension, funds held on the platform (e.g. ISAs or General Investment Accounts, known as ‘GIAs’).  It is likely, that over the longer term, a member will have a suite of investments held on the platform for medium and longer-term planning, such that the effective charges are greatly reduced.

The charges cap above is likely to enable you to reduce management fees on your other investments, too.

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