in Pension Funds Insider
Tackling the complexities of the charge cap
In pensions – as in life generally – it's almost a truism that rarely is anything as simple as it might at first seem. It's often difficult to make a clear statement without feeling a need to recognise exceptions. The ongoing debate about charging is a case in point.
"Transparency" is a keyword in our industry at the moment; particularly in the context of communications to pension scheme members. We should be better informed, not only about the value of our pension, but also about the cost of saving. This is true not only with members but within the industry itself, with complex regulations and rules surrounding the charge cap. This issue came to the fore with the advent of auto-enrolment, where success depended partly on minimising opt-out rates, and low charges were seen as a key factor in this.
Many of those auto-enrolled for the first time have joined money purchase occupational pension schemes; particularly master trusts. Consequently, since 6 April 2015, the Occupational Pension Schemes (Charges and Governance) Regulations 2015 have applied charge controls to the default arrangements of certain occupational pension schemes that provide money purchase benefits, used to meet automatic enrolment duties in relation to at least one jobholder ('relevant schemes').
Such schemes cannot require a jobholder to make any choices, such as about fund investments, so they have to provide a default fund for those who do not express an option or choice.
Trustees must ensure no member's funds in a default arrangement are subject to charges in excess of the cap. . . .
16 Apr 2019 Read the full article