The Government’s Command Paper, ‘Better Workplace Pensions: Further measures for savers’, published in March, set out a range of measures including a cap on charges in default fund arrangements, a ban on inappropriate charges and proposals to introduce minimum governance standards and improve transparency across workplace defined contribution schemes.
Following this, Government launched its consultation on draft regulations on governance and charges in occupational pension schemes in October 2014. Subject to Parliamentary approval, the majority of this legislation will come into force from April 2015, alongside Financial Conduct Authority (FCA) rules in relation to workplace personal pension schemes where appropriate. From April 2015, the Government intends to introduce a charge cap on the default funds of qualifying schemes, set at 0.75 per cent of funds under management and the first phase of enhanced transparency with trustees and Independent Governance Committees (IGCs) being required to report on costs and charges for the first time.
In 2015 Government will consult on regulations under duties in the Pensions Act 2014 requiring information about transaction costs to be disclosed to members and others, and the publication of costs and charges information. The FCA also intends to consult on amending their own rules to introduce equivalent enhanced transparency provisions for workplace personal pension schemes during 2015. The Government has also set out its plans to review the level of the default fund charge cap, to see if it should be lowered, and also whether it should include some or all of the transaction costs that are ultimately borne by members within a cap. This review will take place in 2017.
Taken together the combined effect of these measures on charges, governance and transparency and the Government’s commitment to a review should ensure that savers are being enrolled into workplace schemes that are well run and in members’ interests.