Aviva has seen a 50% year-on-year increase in the number of enquiries from pension schemes that use investment and administration on separate platforms seeking to move to a bundled provider.
Cost is usually one driver to move away from ‘unbundled' schemes, where investments are handled by a dedicated investment platform while administration is carried out by a third-party administrator, paid for by the employer. Administration charges in unbundled schemes are usually paid per member, and since the end of short-service refunds in 2015, some administration costs have risen far quicker for some employers than before.
Bundled schemes are where both administration and investment are managed by a single provider and usually paid for by deducting member benefits. Here, administration charges are included in the member's annual management charge, rather than as an additional fee for the employer to pay.
Aviva head of workplace strategy Dominic Fryer said the increase in enquiries from trustees considering moving away from unbundled shows "the gap between unbundled and bundled member charges has been closing".
"For a long time, the received wisdom was that once a defined contribution pension scheme had sufficient assets, the way to ensure the best member outcomes was to switch to an unbundled model. Times have changed, however - bundled propositions have improved and traffic is no longer one way.
"Efficiency savings and a competitive market have driven down charges for bundled schemes. The differential is smaller than it has ever been," he added.
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