As part of its ongoing aim to protect members in auto-enrolment pension schemes2 , the DW Phas confirmed the introduction of a ban on member-borne commissions3 in qualifying occupational DC pension schemes being used for auto-enrolment in relation to at least one jobholder. The ban will also extend to money purchase AVC arrangements within occupational pension schemes being used for auto-enrolment (even if that is the only DC element of those schemes). Any ban will continue to apply even if a scheme ceases to satisfy the definition in the regulations and the ban will not apply in some circumstances e.g. where a member has opted to access advice or services in relation to the arrangement and certain conditions are satisfied.
The duty to comply with this ban will be imposed on service providers, who will have to confirm in writing to trustees, within one month of the ban applying, that they are compliant, and they are subject to further notification requirements if that confirmation no longer applies.
The scheme trustees’ duties will include having to inform service providers, in writing within certain timescales, that their schemes are being used for auto-enrolment purposes and to report in their scheme return whether or not the service providers have confirmed that their duty has been complied with.
The Pensions Regulator will be responsible for enforcing the ban which includes issuing compliance notices and possible penalty notices for non-compliance.
The regulations relating to these requirements are expected to come into force from 6 April 2016, but the ban itself is to be introduced in stages:
- the ban will apply to any new commission arrangements on or after 6 April 2016;
- commission arrangements already in place before 6 April 2016:
- will not be subject to the ban unless they are varied or renewed on or after that date; and
- the Government is proposing to consult, later in 2016, on the application of the ban more generally to these arrangements.
Because service providers will no longer be able to effectively pass on adviser costs in the affected DC auto-enrolment schemes, employers can expect to have to pay for such advice which will clearly add to the costs of auto-enrolment compliance.