Frequently asked questions about changes to a workplace pension

To help you understand the changes being made to pension schemes to meet auto-enrolment rules here are some of the FAQs we've been asked.

We've split the FAQs into employee and employers/advisers sections. 

Employee questions

General

The DWP is part of the government and are responsible for welfare, pensions and child maintenance policies.  As the UK’s biggest public service department it administers the State Pension and a range of working age, disability and ill health benefits to over 22 million claimants and customers. They’re responsible for introducing the changes to pension scheme charges.

Find more information on the DWP website(Opens new window)

Changes to schemes and plans are scheduled to take place in line with the timeframe set by the regulator. This is determined by the auto-enrolment staging date of the business. If this falls before 5 April 2015 we’ll make most of the changes by May 2015. If your employer’s staging date is after April 2015, we’ll make the changes by the staging date. Changes to Active Member Discounts (AMDs) and commission are scheduled to take place by April 2016, or on the staging date, if later. We’ll explain the timeline for making your plan compliant in the letter we send you.

Most members won’t have to do anything. We'll make all the changes for you.

However, if you have additional benefits within your existing plan (for example, life assurance benefit or loyalty bonus), you may need to give us instructions. We’ll explain how each of these benefits will be affected and what options are available to you in the letter we send you. 

You should speak to your scheme adviser (if you have one) or your employer. You can also read further information on the DWP(Opens new window)(Opens new window) website.

Charging

In most cases this charge covers the scheme administration cost plus the cost of investing in one of our compliant funds. If you, or your employer, have selected a fund not on this list your total charges may be higher than the rate stated in the letter.

If you have an Aegon Retirement Choices (ARC) pension, your letter shows the administration charge, which doesn’t include the fund charge.

The total charge you‘ll pay will be confirmed in the yearly or half-yearly statement you receive from us.

These are funds where the total costs will not exceed the price cap. This means that these charges, combined with the costs to administer the scheme, won’t be more than the 0.75% cap. 

Because we monitor and control these funds’ expenses we can make sure they comply with the cap.

Other funds in our range may also sit below the 0.75% cap, depending on your scheme's AMC/service charge. We’ve listed a few of these funds below, but please note that this list isn’t exhaustive.   

Here's a list of compliant funds:

Compliant funds that can be selected as a scheme's default fund

These funds can be chosen by employers for use as a scheme’s default investment strategy.

  • 50/50 Bond and Equity Index Lifestyle
  • 50/50 Global Equity Index Lifestyle
  • 75/25 Equity and Bond Index Lifestyle
  • Adventurous Tracker (Annuity Target)
  • Adventurous Tracker (Flexible Target)
  • Aegon Default Equity and Bond Lifestyle
  • Balanced Tracker (Annuity Target)
  • Balanced Tracker (Flexible Target)
  • Growth Tracker (Annuity Target)
  • Growth Tracker (Cash Target)
  • Growth Tracker (Flexible Target)
  • Universal Balanced Collection (Annuity Target)
  • Universal Balanced Collection (Flexible Target)
  • Universal Lifestyle Collection

Funds that may be compliant, depending on the charges associated with your scheme

These funds have additional charges which may, depending on the other charges for your scheme, take your overall charge above the 0.75% price cap. These funds are available for employers to choose as default funds where the scheme charge allows.

  • Balanced Lifestyle
  • Cautious Lifestyle
  • Dynamic Lifestyle
  • Ethical Managed (Flexible Target)
  • MI Workplace Savings (H)
  • MI Workplace Savings (M)
  • MI Workplace Savings (L) 

Compliant funds that can be selected as a scheme's default fund

These funds can be chosen by employers for use as a scheme’s default investment strategy.

  • Adventurous Tracker (Annuity Target)
  • Adventurous Tracker (Flexible Target)
  • Balanced Lifestyle
  • Balanced Tracker (Annuity Target)
  • Balanced Tracker (Flexible Target)
  • Cautious Lifestyle
  • Dynamic Lifestyle
  • Growth Tracker (Annuity Target)
  • Growth Tracker (Cash Target)
  • Growth Tracker (Flexible Target)
  • SE Blackrock Aquila 50/50 Global Equity Index Lifestyle
  • SE Blackrock Aquila 75/25 Equity and Bond Index Lifestyle
  • SE Blackrock Aquila 50/50 Bond and Equity Index Lifestyle
  • SE GPP Default
  • Stakeholder default (only available to stakeholder schemes)
  • Universal Lifestyle Collection
  • Universal Balanced Collection (Annuity Target)
  • Universal Balanced Collection (Flexible Target)

Other compliant funds 

These funds sit within the price cap. This list includes funds that were offered as default fund options or used in default strategies in the past.

  • Adventurous Core Portfolio
  • Adventurous Core Lifestyle Portfolio
  • Balanced Passive
  • Balanced Passive Lifestyle
  • Balanced Core Portfolio
  • Balanced Core Lifestyle Portfolio
  • Balanced Plus Core Portfolio
  • Balanced Plus Core Lifestyle Portfolio
  • Cash
  • Cautious Core Portfolio
  • Cautious Core Lifestyle Portfolio
  • Conservative Core Portfolio
  • Conservative Core Lifestyle Portfolio
  • Continental European Equity Tracker
  • Corporate Bond Tracker
  • Distribution
  • Emerging Market Equity Tracker
  • Ethical
  • Ethical Lifestyle
  • Global
  • Global Equity Tracker
  • Global Equity Tracker Lifestyle
  • Growth Plus Core Portfolio
  • Growth Plus Core Lifestyle Portfolio
  • Growth Core Portfolio
  • Growth Core Lifestyle Portfolio
  • Index-Linked
  • Index-Linked Gilt Tracker
  • Japan Equity Tracker
  • Long Gilt
  • Mixed
  • North American Equity Tracker
  • Overseas Corporate Bond Tracker
  • Overseas Equity Tracker
  • Overseas Government Bond Tracker
  • Pacific (ex Japan) Equity Tracker
  • SE BlacRock Aquila 40/60 Global Equity Index
  • SE BlackRock Aquila 40/60 Global Equity Index Lifestyle
  • SE Blackrock Aquila 50/50 Bond & Equity Index
  • SE Blackrock Aquila 50/50 Global Equity Index
  • SE Blackrock Aquila 75/25 Equity and Bond Index
  • SE Blackrock Aquila Consensus
  • SE Blackrock Aquila Consensus Lifestyle
  • SE Blackrock Aquila Corporate Bond Index – All Stocks
  • SE Blackrock Aquila European Equity Index
  • SE Blackrock Aquila Japanese Equity Index
  • SE Blackrock Aquila Over 15 Years Corporate Bond Index
  • SE Blackrock Aquila Over 15 Years Gilt Index
  • SE Blackrock Aquila Over 5 Years Index Linked Gilt Index
  • SE Blackrock Aquila Pacific Rim Equity Index
  • SE Blackrock Aquila UK Equity Index
  • SE Blackrock Aquila US Equity Index
  • SE Blackrock Aquila World (ex UK) Equity Index
  • Technology
  • UK Corporate Bond
  • UK Equity
  • UK Equity Tactical
  • UK Fixed Interest
  • UK Fixed Interest & Global Equity Tracker
  • UK Fixed Interest & Global Equity Tracker Lifestyle
  • UK Gilts All Stocks Index Tracker
  • UK Government Bond
  • UK Index Tracker
  • UK Long Corporate Bond
  • UK Smaller Companies
  • Universal Balanced Collection

Funds that may be compliant, depending on the charges associated with your scheme 

These funds have additional charges which may, depending on the other charges for your scheme, take your overall charge above the 0.75% price cap. These funds are available for employers to choose as default funds where the scheme charge allows.

  • Ethical Managed Lifestyle
  • Ethical Managed (Flexible Target)
  • MI Workplace Savings (H)
  • MI Workplace Savings (M)
  • MI Workplace Savings (L) 

Not all charges must comply with the charges cap and are in addition to this cap.  These are:

  • Transaction costs, which are additional expenses that fund managers pay when buying and selling stocks and shares in a fund.
  • The charges we make for complying with a court order or costs for pension sharing orders.
  • The charges you agree to for non-standard services. 

A new annual management charge (AMC) is being applied to the scheme and members’ plans. In certain circumstances we’ll apply a fund charge rebate so that the AMC meets the price cap.

This is the fund(s) members are automatically invested in when they join a scheme if they don’t specifically choose one.

All members will benefit from the new scheme price, which will always be below the cap. However if you choose to invest in funds other than the scheme default fund, these may attract higher charges which, when added to the scheme price, may take the overall charge higher than 0.75%.

We expect the vast majority of members to see either no change or a reduction in the charges they'll pay between now and when they take their pension benefits.

Your next yearly or half-yearly statement will provide a projection showing the effect these new charges will have on what you might get back at retirement.

If there are changes to your plan we'll write to you 30 days in advance.

 

Plan transfers

Most members will keep the same plan number, however some members will get a new one.  If you do need a new plan number we’ll write and tell you before we make any changes.  We’ll also write to you to let you know your new plan number when we’ve made the changes. 

The complexity of older style plans, and the system they were written on, don’t support the new simplified structure required by the new regulations. As a result we’ll create new compliant plans on more modern charging structures and systems.

Your plan remains in the same Aegon Group Personal Pension Scheme (Aegon Stakeholder Scheme or ARC Self Invested Personal Pension Scheme) so there are no changes to your contract, even if we give you a new plan number.

When we write to you, we’ll explain how we’ll treat your existing fund value and whether or not it will be moving over to the new charging structure.  We’ll also explain what your options are and what this means for you, if we’re not moving your existing funds.

Because we’ve moved your plan across to the new charging structure, we’ve had to create an equivalent fund for your new plan. We’ve opened a new fund called RTT. This fund is exactly the same as the RET fund and your investments aren’t affected.

If you don't want to remain invested in with-profits you can choose to transfer your existing fund value to your new plan number. You can do this by completing an Instruction to transfer fund value form(Opens new window) 

Where you have additional benefits in your old plan, for example life cover, it may not be in your best interests to move your existing fund value to your new plan. We’ll write to you to explain your options in advance of making any changes to your plan.

New regular contributions from you and your employer will be paid into your new charging structure plan. However you can choose to make additional contributions to your old plan if you wish. If you do this, we’ll convert your old plan to an individual personal pension plan. 

If you get a new plan number you’ll have both plans in place for a short time while we process these changes.  This means you might get communications from us on both plan numbers until the old plan number is closed. If you’ve registered for online services, you’ll see them both there too.

Where you have additional benefits in your existing plan and wish to leave them there, you’ll continue to receive communications about this plan. As all future contributions will go into your new plan number you’ll also receive communications from us separately regarding this plan.

We can’t give a specific date when this will take place. But, we can tell you that it will always be after we've set up your new plan number, collected the first payment and applied it to your new plan.

Your annual statement following transfer completion will show your total fund value.

Active member discounts (AMDs)

AMDs are being removed to make sure that those no longer contributing to a scheme are not disadvantaged. For all schemes with AMD we’ll set a new price, and will aim to at least match the current active price. However, if it’s not financially viable for us to administer the scheme at this price, we’ll apply a monthly plan charge. The combination of the new price and any plan charge will still comply with the cap.

This is an additional charge applied to your plan, in some cases, to cover costs for administering and monitoring the scheme. There is also a charge for the fund you’re invested in, which is set by the fund manager. The combination of these charges must comply with the cap, if you’re a default investor.

Employer/adviser questions

General

We're reviewing all active workplace schemes to make sure they comply with the new rules between now and December 2017. We’ll be in touch with advisers and employers individually to let them know how their schemes will be affected.

For many of our schemes, we'll be making simple amendments within the existing scheme. For older style contracts, where we can't make the changes within the existing scheme, we'll be re-writing the scheme to a more modern system. This will mean a new scheme number will be issued and members will be given new plan numbers.

We can’t give you specific dates for making the required changes as schemes are being scheduled based on varying criteria, to make sure there's limited disruption for employers and employees. The process started in December 2014 and we’re working hard to make sure applicable schemes are compliant by the appropriate deadlines.

We’re writing to employers, advisers and Trustees in advance of any individual scheme change to give them enough time to speak to members and discuss the impact of any change.

We’ll also be writing to each active member of your scheme in advance of making any changes to their plans to explain the changes we’re making, what it means for them, and any options they have.

We’re creating a specific amendment schedule so we can control the impact on all stakeholders and to make sure we co-ordinate this change with scheme staging activity. Unfortunately due to strict deadlines, we‘re not able to change the date your scheme is amended. 

Both the DWP and the FCA have made it clear that the provider is responsible for making sure that qualifying schemes are set up on a price-capped basis.  Failure to make sure a scheme is compliant will be a breach of the FCA requirements.  The provider would be expected to stop accepting contributions into a non-compliant scheme. 

For schemes held in trust, the Trustees are responsible for making sure they are compliant. We’ll provide support if needed, but we won’t make changes to any schemes unless we’re instructed by the Trustees.

To meet these obligations and avoid schemes becoming non-compliant we’ll need you to return any forms, for example Direct Debit or fund switch instructions, to us within the timescales set out in the letter we send you.

We’ll support you through the entire change process, making sure you’re aware of the requirements in advance so you can manage these along with your existing business priorities. We have a dedicated team – Scheme Solutions - focusing entirely on supporting you on the road to full compliance. For ARC schemes, Platform Client Support will continue to help you.

Trustees are responsible for making sure their schemes are compliant, however we’ll provide support if needed.

We can’t provide specific guidance on consultation periods, as requirements are set out in employment law. You could refer to your own legal advisers or to acas.org.uk(Opens new window) for further guidance on your responsibilities as an employer.

We’ll write to each individual scheme member explaining the changes we‘ll be making to their plans and any options they may have. We’re aiming to write at least 30 days in advance of the effective date of these changes, where possible. You may want to engage with them beforehand so they’re aware that we’ll be writing to them to explain how they’re affected by these changes and it doesn’t come as a surprise.

We’ve written to members who are in schemes which have passed their auto-enrolment staging date. For those still to stage, changes will take place on the staging date. We’re planning to write to all employers and advisers three months in advance of any changes taking place.

Charges

All members will benefit from the new scheme price, which will always be below the cap. Where a member decides to invest in a fund other than the scheme default investment strategy, then there may be additional expenses to that fund which could take the overall charge above 0.75%.

While we're mostly reducing the charges we collect, we'll introduce an employer fee for schemes where the average minimum monthly member contribution is less than £125. This is so that we can continue to protect the price cap for members, while making sure that the scheme remains economically viable.

Yes, we wrote many of our older schemes on more complex charging structures which combined higher upfront/ongoing charges with a loyalty bonus when the plan matured.

The DWP has confirmed that only AMC or AMC plus plan charge are allowable structures within the new regulations.

Active member discounts (AMDs)

For all schemes with AMD, we’ll set a new price and will aim to at least match the current active price. However, if it’s not financially viable for us to administer the scheme at this new price, we’ll apply a monthly plan charge.

There were two ways to achieve this, either increase the active AMC or maintain the active AMC and introduce a small plan charge to be added to any existing charges. We believe the introduction of a plan charge will be clearer for our customers to understand.

The revised charging structure for the scheme has been priced to cover the costs of running the scheme. In some cases, it’s not financially viable for Aegon to administer the scheme at the active price, and therefore we need to apply a monthly plan charge.

We’ve not been writing any new business with AMD since 31 August 2014.

We’re removing all AMD from the date when the new terms take effect. If your scheme already complies with the charge cap we’ll remove AMD in April 2016 or the scheme staging date if later.

Any individual who has left the scheme prior to the DWP re-price will retain the higher AMC. The changes being made aren't retrospective.

Commission/consultancy charging

Consultancy charging was already banned from an employer’s staging date where an Agreement wasn’t in place by 10 May 2013.  The DWP have now banned consultancy charges in all qualifying schemes from April 2015 even where an Agreement already existed. We'll therefore be removing consultancy charging from qualifying schemes in line with DWP timescales.

This means that where employers (or employees) receive advice from an adviser they’ll have to make alternative arrangements for paying the adviser, for example by paying a fee directly to that adviser. 

We've decided in the interests of consistency, simplicity and cost, to apply the DWP changes to all schemes whether they’re qualifying or not. As a result, we’ll be removing consultancy charging from all our schemes by April 2015 or on staging date, if later.

Employers will need to discuss and agree payment of a fee with their adviser.  

The legislative changes only apply to employers as and when they stage. So there will be schemes that will continue to generate commission after 1 April 2016. We’ll then remove this at their staging date. 

Questions about additional benefits

General

These are benefits that some members will have in their old plan and we can’t carry them over to their new plan number. So, we give members the option to keep the additional benefits in their old plan. These are life cover, loyalty bonus, with-profits funds and fund value rebate. We’ll write to you if you have any of these additional benefits, explaining the options available to you. We’d also recommend that you speak to a financial adviser if you have questions or concerns about what these benefits mean for you and what it would mean to stop them.

Members with one or more additional benefit should consider which they want to keep and the impact on their old and new plans. For example:

  • Keeping life cover under the old plan is likely to reduce the value of the plan, as no new premiums will be invested into this plan and the cost of the life cover will be deducted from the plan value each month. This will impact other additional benefits such as with-profits funds and loyalty bonus - if these exist.
  • The same level of life cover may not be available elsewhere as is currently in the old plan.
  • Any funds in the old plan won’t benefit from the price cap.

We recommend members speak to an adviser about their option(s).

Waiver of contribution

It’s an optional benefit which will pay contributions to members’ pension plans if they’re unable to work due to illness or injury. The member and/or employer will pay an additional contribution (along with their pension contribution) to pay for this.

We‘ll carry this over to the new plan number on the same terms with no action required.

These members won’t be moved to the new plan number until they go back to work and contributions start being paid again.  

We’ll carry over the same terms which applied under the old plan without further underwriting. We’ll only need new underwriting when this would have happened anyway, for example if the level of contributions on which waiver is based goes above a certain level - currently £20,000 a year.

Waiver in the new plan will be on a post 6 April 2001 basis, however we’ll take this into account when members are moved to the new plan number so that they aren’t worse off.

Life cover

We haven’t offered this as an option under new pension plans for a number of years.

Although life cover isn’t available under the new plan number, we recognise it can be a valuable benefit so members who have this additional benefit will keep it at its existing level. Employer and member contributions will still be directed to the new plan number and the life cover will be paid for by the cancellation of units in the old plan.

We only expect this to happen in a small number of cases. We’ll regularly review all members’ funds where there’s life cover and will contact members in advance if we think this might happen. Our review will only be approximate and can’t take into account, for example sudden stock market falls or rises. We suggest members check the level of their fund value and the ongoing cost of their life cover contributions.

If there isn’t enough fund value to continue paying for the life cover, members can either let the life cover stop or they can start paying contributions to keep their existing level of life cover, and we’ll convert their old plan to an individual pension plan.

No. We haven’t offered this benefit under pension plans for a number of years, but we’ll keep it at its current level for members who have it under their old plan.

No. Members can let us know if they no longer want life cover. We’ll transfer the fund value from their old plan to their new plan number so that their whole fund will benefit from the price cap.

All employer contributions will be directed to the new plan number.

In some cases, the life cover element of the total contribution may be higher than the pension element and so the fund in the old plan may run out more quickly, as contributions will no longer be paid into it. Please see the question ‘What if the old plan doesn’t have enough money to keep paying for life cover?’

This is something for employers to agree with their employees during any consultation period.

Yes – we’ll cancel life cover if a member stops contributing to their new plan number. This is because the life cover is provided as part of being an active member of the pension scheme and so if contributions stop, the life cover will also stop.

Loyalty bonus

In some older pension schemes, where contributions are paid over a period of time, an addition to the fund value may be given depending on the terms of the scheme.

We stopped offering loyalty bonus to new pension schemes a number of years ago.

Although it isn’t available under the new plan number, we recognise it can be a valuable benefit, so we’ll help protect members’ benefits as follows:

  • For most members, who are transferring all assets to their new plan number, we’ll value their loyalty bonus and add it to the transfer value being paid to their new plan number.
  • However for members with a long history of paying contributions and who are close to taking their benefits, we’ll leave their fund in their old plan.

If we don’t hear back from members we’ll apply these principles. However it’s important that members consider their own position and get the appropriate advice.

Where a member has other additional benefits, a different position may apply. For example where they have life cover, we won’t transfer their fund value to their new plan number unless we’re asked to do this and the member understands this will cancel their life cover.

Yes

We’ll write to members to let them know about the proposed changes to their scheme. If at that point they tell us they want to keep their fund in their old plan, we won’t transfer it. They can also pay contributions into their old plan to continue their loyalty bonus and we’ll convert their existing plan to an individual pension plan for them. However, employer contributions will always be paid into the new plan number.

Members with a long history of paying contributions and who are close to taking their benefits, can let us know if they want to transfer their fund value to their new plan number. 

Fund value rebate (FVR)

FVR is an option chosen by the employer when the scheme was set up. It provides a yearly bonus of 0.25% for members whose fund value is £50,000 or more.

We’ve removed FVR where the new price cap results in a lower price than would have applied to the old plan with FVR.

For example, a scheme with a 1.5% annual management charge (AMC) and FVR of 0.25% could, at best, achieve a price of 1.25%. Under the DWP rules the price must now be capped at 0.75%, therefore all members are better off and we've removed the FVR.

Where the scheme AMC is below 1% we’ll continue to offer FVR for all members under the new price cap.

With-profits

Recent changes in legislation for occupational pension schemes (the pension charge cap) mean we’re required to make a number of changes to the administration of our pension schemes. 

We closed our with-profits funds to new entrants from August 2013 and so we’ve taken the decision not to offer with-profits as an investment fund choice for ongoing regular contributions within our pension charge cap compliant schemes.

Due to guaranteed growth rates and/or protection from market volatility, it might not be in the member's best interests to move their existing fund value out of the with-profits fund. So, we’ll leave their existing with-profits fund value in the old plan and the charges will remain at their current level. We'll write to them with details of the options available, if they'd like to do something different.

New regular contributions will be paid into the new plan number.

Ongoing regular contributions into our with-profits funds may still be paid into the old plan, and we'll convert it to an individual plan. If you wish to do this, these contributions will be limited to the same level as is currently being paid into the with-profits fund(s).

The with-profits fund contains a number of sub-funds with different features.  The investment guarantees associated with each of these funds are listed below along with links to our quarterly fund factsheets for further information about each fund.

Sub-Fund Investment guarantees in summary Factsheet
With-Profits Endowment pension fund (WPE) Guaranteed minimum return of around 5.5% p.a. for units held to your pension date.

WPE Fund(Opens new window)

High Equity With-Profits pension fund (WP2) A guarantee that the price you receive when you sell units at your pension date will not be less than the selling price when you bought the units (or any higher daily unit price thereafter).

WP2 Fund(Opens new window)

Deposit Administration Fund (DAF) A guarantee that the price you receive when you sell units at your pension date will not be less than the selling price when you bought the units (or any higher daily unit price thereafter).

DAF Fund(Opens new window)

With-Profits Option 1 pension fund (WP1) Guaranteed minimum return of around 4.0% p.a. for units held to your pension date.

WP1 Fund(Opens new window)

New Generation With Profits (NGWP) There are no minimum investment performance guarantees provided by our NGWP funds.

NGWP Cautious Fund(Opens new window)

NGWP Growth Fund(Opens new window)

By ‘pension date’ we mean the normal retirement date specified at point of entry into the scheme.