New pension fund clients of St James’s Place (SJP) face paying higher fees – despite the UK’s largest wealth manager recently bowing to pressure to offer better deals.
Consumer duty rules recently introduced oblige financial firms to focus on ‘fair value’ and ‘good outcomes’ for customers.
In response SJP, which has long been criticised for high and opaque charges, unveiled the largest overhaul of its fee structure in its 31-year history to comply with the new rules. These included scrapping controversial early withdrawal charges on all new products in the second half of 2025, which also covers investment bond and pension business.
But an analysis of SJP’s updated fee structure has found that new pension fund customers will soon pay more – and will continue to do so for up to 17 years.
Pensions are a huge part of SJP’s business, accounting for £81 billion of the £159 billion it managed at the end of September 2023.
Sign of the times: An analysis of SJP’s updated fee structure has found that new pension fund customers will soon pay more – and will continue to do so for up to 17 years
SJP currently charges a ‘deferred sales charge’ – in effect a commission – of 6 per cent of a pensions investment, plus an annual charge of between 0.5 per cent and 1 per cent. That takes the cumulative cost after ten years to 15 per cent, see below.
The new pension charges include a smaller initial upfront fee of up to 4.5 per cent and annual charges of 1.15 per cent. But the total cost after ten years is higher than before – at 16 per cent.
‘SJP might be simplifying and unbundling fees for new pension clients, but they neglected to mention that what’s replacing them will cost clients more,’ said Philip Rose, co-founder of Edinburgh-based investment firm Halwyn Capital, who crunched the numbers.
Rose sees two risks in this strategy. ‘First, by treating your customer base and the wider industry as fools you run the risk of a Ratner-style moment.
‘They have quite carefully worded their price change release to very deliberately not mention if it’s more or less expensive for pension clients. And they have presented it as if they are doing customers a favour, not charging them more.
‘Second, one of their biggest shareholders was quoted as not understanding their charges, so what chance does an SJP adviser or client have?’
Rose is also concerned that SJP is charging more for poor performance. Its pension funds invest in corresponding SJP unit trusts but only seven of 45 of these underlying investment vehicles delivered ‘overall value’ for clients in the firm’s most recent assessment.
‘By inference this suggests pension clients are not receiving good value either – and that’s before prices go up,’ said Rose.
‘SJP has not been clear about the increase in overall charges for new pension clients despite several opportunities to do so in their public statements,’ he added.
‘This appears disingenuous on the part of the company and results in reputational risk.’ The Financial Conduct Authority, the City watchdog, has been criticised for not curbing sky-high fees but it insists it is not a price regulator.
‘We want competitive markets with products sold clearly and priced fairly,’ a spokesman said. ‘Consumer duty isn’t about us setting the price. It means financial firms proving to themselves, and if necessary us, that what they charge reflects the value customers receive. If they can’t, they need to make changes.’
SJP, whose own share price has tanked as investors baulked at the estimated £150 million cost of implementing the fee changes, said the majority of new clients will benefit from lower charges across its product range, including those in bonds and pensions – if they stay invested over the long term. The new initial charging structure to cover advice provided was simpler and comparable with the rest of the industry, it added.
‘While some new shorter term clients will pay more under the new structure, the majority will pay less, as part of an overall reduction in charges,’ a spokesman said.
‘The fee structure will compare favourably to the wider wealth management industry,’ he added.
