DWP - Better workplace pensions
The Department for Work and Pensions (DWP) has introduced a number of changes which must be made to pension schemes used to meet auto-enrolment rules, to make sure that schemes are run in members’ best interests.
Having already successfully supported over 2,500 employers through auto-enrolment, we’re committed to making sure that all our workplace schemes comply with the new rules, with the minimum disruption to our customers.
Watch our short video to see what’s changing.
The main changes are:
- Charges for members investing in a scheme’s default fund(s) will be 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 the scheme membership are invested in the same fund(s).
- Active member discounts (AMDs) are being removed, to make sure that members who stop making contributions to a scheme aren’t disadvantaged.
- Consultancy charges have been removed from April 2015 or on staging, if later.
- For schemes already staged, commission payments stopped by April 2016. Schemes staging after 6 April 2015 will have commission removed on staging.
- Additional governance requirements are being implemented for Trustees to be sure members are receiving good value for money.
We’re actively working with all involved, and are well on the way to making sure all our schemes comply with the rules.
Whether you’re an employer, employee, adviser or trustee, you can find out how the new rules affect you by clicking on the appropriate section below.
- If you didn’t actively choose where to invest your contributions when you joined the scheme, from 5 April 2015 you won’t pay more than 0.75% of your plan value in charges each year.
- If you’re invested in any fund, along with 80% or more of the scheme members, you’ll benefit from the 0.75% cap as long as the fund is one of those on our compliant list and any other charges associated with that fund don’t take the charge over the cap. If this is the case, we’ll ask the scheme owner to choose a different default fund which meets the cap requirements, and we’ll automatically switch your existing funds and re-direct any future payments to this new default fund.
- If you chose which fund(s) to invest your contributions in you’ll still benefit from the reduction in scheme charges, however there may be additional expenses associated with that chosen fund that could take the overall charge above the cap.
- If you’re auto-enrolled into a new scheme and don’t actively choose where to invest your contributions, they’ll automatically be invested in the scheme default investment strategy and you won’t pay more than 0.75% of your plan value in charges each year.
- If you’re already contributing into a qualifying scheme at staging date, and are invested in one of our compliant default fund(s), you’ll benefit from the 0.75% cap.
- If you’re already contributing into a qualifying scheme at staging date and aren’t invested in the default investment strategy or are auto-enrolled and choose to invest in other fund(s), you’ll still benefit from any reduction to the overall scheme price. There may, however, be additional expenses associated with that fund choice that could take the overall charge above the cap.
- From 6 April 2015, all members paying contributions into the default investment fund(s) of a scheme will pay charges of no more than 0.75% of their plan value each year.
- This also applies to members where 80% or more are invested in the same investment fund.– If this fund isn’t one of our compliant funds and/or the AMC plus any other expenses are more than the 0.75% cap, we’ll have asked you to transfer to one of our compliant funds to give members the benefit of the cap.
- In some cases the older, more complex schemes will be 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’ll collect from scheme members, we’ll introduce an employer fee on schemes which are no longer economically viable for us to administer within the price cap. Where this applies to your scheme, we’ve written to you and the scheme owner with specific details of what this means.
- Commission will be removed on the date the scheme changes go live, with the exception of renewal or level commission, which will be removed in April 2016.
You’ll have had a letter from us explaining the changes to your clients’ schemes and if they needed to do anything.
The changes are generally the same as for businesses that staged before 5 April 2015, but will be applied by the appropriate staging date.
For these schemes, commission will be removed at the staging date, with the exception of SP or TV commission. This will be capped at 2% from April 2015 and removed at the staging date.
Wherever possible we’ll write to you and your client well in advance of the staging date, with specific details of how their scheme will be affected and if they need to do anything.
- Where an active member discount (AMD) has been in place, this will no longer apply. 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 that this isn’t financial viable. In these instances, we’ll charge a monthly plan charge for members, however this will be included within the cap. We’re writing to the affected members and will apply this change from 6 October 2016 for businesses already staged, otherwise from staging date.
- Consultancy charges are being removed from April 2015 or staging date, if later.
For more detail on the changes, please read our frequently asked questions.
The new rules introduced by the DWP also apply to occupational schemes offering money purchase benefits, unless they’re specifically exempt. The information below summarises our understanding of how these changes might affect the scheme you have with us and what you need to consider.
Although we’ll provide support if you need it, as trustee of your scheme, you are responsible for making sure it complies with the new changes.
For relevant (non-exempt) schemes, the main changes are:
- All members paying contributions into the default investment fund(s) of a qualifying scheme should pay a charge of no more than 0.75% of their plan value each year.
- This also applies to members where 80% or more are invested in the same investment fund.
This change took effect from 6 April 2015 for schemes already staged, or will be effective from the scheme staging date, if later.
- Where an active member discount has been in place, this will no longer apply. AMDs are being removed to make sure that members no longer contributing to the scheme aren’t disadvantaged.
- Commission payments in qualifying schemes will be removed from April 2016. Between April 2015 and 2016, the total annual charge, plus any commission payments must comply with the charging cap.
If you think your scheme is relevant and you need to take action to make sure it is 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 which apply to charging structures and schemes, the DWP has 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 ensure it is designed in the best interest of its members.
- Calculate and assess for good value, charges and transaction costs to be paid by members.
You can find out more from our factsheet New charge restrictions and governance requirements, or 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.
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