DWP - Better workplace pensions
In March 2014 the Department for Work and Pensions (DWP) introduced a number of changes to be made to workplace pension schemes used for auto-enrolment (also known as 'qualifying schemes), to protect the interests of savers.
With the majority of these changes having already been made, we've committed to making sure that all our workplace schemes comply with the new rules.
The main changes were:
- Charges for members investing in a scheme's default fund(s) are now capped at 0.75% of the member's fund value each year. This cap also applies to non-default investors where 80% or more of scheme members are invested in the same fund(s).
- Active member discounts (AMDs) have been removed - or willl be removed on staging - making sure that members who stop making contributions to a scheme aren't disadvantaged.
- Consultancy charges have been removed from April 2015.
- For schemes already staged, commission payments ended in April 2016. Commission is removed on staging, for schemes with a staging date after 6 April 2015.
- Additional governance requirements have been put in place for Trustees, to be sure members are receiving good value for money.
You can find out how these rules affect you by reading the sections below.
- Members who don't actively choose where to invest their contributions when joining a staged scheme, won't pay more than 0.75% of their fund value in charges each year.
- Those who actively choose to invest in funds other than the default fund will still benefit from the reduction in scheme charges, however there may be additional expenses associated with that fund which could take the overall charge above the cap.
- Members invested in any fund, along with 80% or more of scheme members in staged schemes, also benefit from the price cap - as long as the fund is on our list of compliant funds and any other charges associated with that fund don't take the charge over the cap.
- If a scheme's default fund isn't on our list of compliant funds, or other charges associated with it take the charge over the cap, we're asking the scheme owner to choose a new default fund which meets the cap requirements. Where appropriate, we'll automatically switch existing funds and re-direct future payments to this new default fund.
- In some cases the older, more complex schemes are being moved across to a modern system which supports the new pricing structure. If this is the case, employers will get a new scheme number and members will get a new plan number.
- While we're often reducing the charges we're collecting from scheme members, we're introducing an employer fee on schemes which are no longer economically viable for us to administer within the price cap. Where this applies, we've written to scheme owners and members with specific details of what this means.
For schemes yet to stage, the above will apply from the staging date.
Where an active member discount (AMD) has been in place, this no longer applies from staging. AMDs are being removed to make sure that members no longer contributing to the scheme aren't disadvantaged.
We're aiming to match the current active price on these schemes, however in some cases the cost of administering the scheme means this isn't economically viable. In these instances, we'll apply a monthly plan charge for members, however this will be included within the cap. We're writing to the affected members and have applied this change from 6 October 2016 for schemes already staged, otherwise from staging date.
For schemes staging after April 2015, commission will be removed at the staging date - with the exception of single contribution or transfer payment commission. This was capped at 3% from April 2015 and removed at staging date.
Consultancy charges were removed in April 2015.
The rules described above also apply to occupational schemes offering money purchase benefits, unless they're specifically exempt. Although we'll provide support if you need it, as Trustee of your scheme, you're responsible for making sure it complies with the rules.
If you think your scheme is relevant and you need to take action to make sure it's compliant, please contact us and tell us what changes you want to make to your scheme. If we don't hear from you we'll assume your scheme is compliant or exempt.
As well as the changes that apply to charging structures and schemes, the DWP also introduced a specific set of governance regulations aimed at Trustees. The new regulations apply to relevant schemes and, in summary, state that Trustees must:
- Appoint a chair, where the scheme doesn't already have a chair in place.
- Prepare an annual statement regarding governance, which will form part of the scheme's annual report.
- Make sure 'core financial transactions' are processed 'promptly and accurately'.
- Prepare a statement of investment principles (SIP) for any default arrangement, to make sure it is designed in the best interests of its members.
- Calculate and asses for good value, charges and transaction costs to be paid by members.
You can find out more by reading our frequently asked questions.
Got any questions
Call us on 0345 610 0003, email us at email@example.com or use the useful links below:
Useful forms and documents
- Welcome to your pension (PDF - 2.1mb)
- Employer fee agreement (PDF - 81kb)
- Alteration of fund choice form (PDF - 0kb)
- Plan alteration form (PDF - 203kb)
- Instruction to transfer fund value (PDF - 123kb)
- SmartEnrol acceptance terms (CIMP)
- Auto-enrolment acceptance terms (CIMP - not using SmartEnrol)
Workplace pension guide
Employers’ pension scheme requirements.
Find out about our funds for company pension schemes.
Already got an Aegon company pension? Learn more about it here.