This consultation sets out proposals in relation to workplace personal pension schemes which are being used by employers to comply with automatic enrolment. It is said to affect FCA regulated businesses operating contract-based workplace personal pension schemes. The proposals include (broadly) the following:

From 6 April 2015

  • a cap on charges within default funds equivalent to 0.75% p.a. of funds under management.  If the scheme becomes a qualifying scheme for the employer after 6 April 2015, then the cap will apply from the date it becomes such a qualifying scheme; and  
  • measures preventing firms from paying or receiving consultancy charges in most circumstances.

From 6 April 2016

Measures preventing firms from:

  • paying commission or other charges from members' funds for advice which are not initiated or expressly agreed to by scheme members; and  
  • applying different charges based on whether or not the member is contributing.

Providers themselves will be required to implement any charge caps so when the rules have been finalised employers should check that their automatic enrolment arrangements are operating with these in place. The charge restrictions may signal a restriction in the availability of auto enrolment products going forwards and/or their quality and it remains to be seen the extent to which IGCs (see our article on these) will be able to successfully ensure standards in the latter are maintained.