In October 2013, the Government issued its consultation in relation to charges in defined contribution schemes and disclosure and transparency. Among the proposals floated were a cap on charges of "funds under management" of between 0.75% and 1% - no draft definition of charges was set out in the consultation but the Government said it would define charges widely in future regulations. For our update on the consultation, click here
Since then Pensions Minister, Steve Webb, has announced that the proposals regarding a cap on charges would be postponed for a year to allow for proper consideration of all the 166 responses received to the consultation. Draft provisions have, however, now been included in the current Pensions Bill in relation to disclosure and transparency. Under these provisions, the Secretary of State must issue regulations "requiring information about some or all of the transaction costs of work-based money purchase schemes" to be given to members. The Department for Work and Pensions has stated that the amendment demonstrates the Government's firm belief that transparency of costs and charges is "fundamental for good scheme governance and to enable comparison[s] between schemes" to be made. However where schemes are already subject to regulations around disclosure, the amendment will not apply if these provisions are "adequate". Lord Freud of the DWP explained that the intention of this qualification is to provide for a situation in which the Financial Conduct Authority has made its own rules for disclosure of information about transaction costs in relation to contract-based schemes, in which case the Secretary of State may need to make regulations only for trust-based schemes, which are regulated by the Pensions Regulator.
Speculation still continues over whether the Government's announcement that the provisions relating to caps on charges would be delayed actually means that the proposals will be dropped altogether. An amendment tabled by the Opposition requiring the Government to lay regulations in relation to charges by 30 April 2015 at the latest to force the issue was defeated. However, the Pensions Minister has reiterated that the Government is committed to its policy to impose a cap on charges