The Financial Conduct Authority (FCA) has today confirmed final rules which will require firms operating workplace pension schemes to implement a charge cap for default funds used for automatic enrolment.
Default funds are used automatically to invest pension scheme members who have not actively chosen a fund into which to invest.
From the 6 of April, firms providing workplace pension schemes used by employers for automatic enrolment will have to cap the charges within default funds to 0.75% per year of funds under management.
Christopher Woolard, director of strategy and competition at the FCA said: “It is important that those saving into workplace pension schemes get value for money and this is especially true for those who are not playing an active role in deciding where their money is invested.
“Schemes need to work effectively for members and the charge cap, alongside other new measures such as independent governance committees and transparency of costs, will help to ensure this going forward.”
Under the new rules firms will also be prevented from paying or receiving consultancy charges and paying commission for advice not expressly agreed by scheme members. Firms will also be prevented from charging active and deferred members of schemes differently based on whether they are contributing to the scheme or not.
The FCA has been working closely with the Department for Work and Pensions (DWP) to ensure that all members benefit from the same good quality standards regardless of type of workplace scheme. Similar regulations will be introduced with effect from 6 April 2015 by the DWP to ensure value for money in relevant occupational pension schemes.
Notes to editors
- Policy statement 15/5: Final rules for charges in workplace personal pension schemes and feedback on CP14/24[1]
- The FCA have today published a call for evidence on transaction costs[2].
- On the 1 April 2013 the Financial Conduct Authority (FCA) became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
- The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
- Find out more information about the FCA.