The Financial Conduct Authority (FCA), confirmed final rules, which will require firms operating pension schemes to implement a charge cap for default funds used for automatic enrolment.
The FCA has been working hand-in-hand with the Department of Work and Pensions (DWP) to make sure that all members benefit from a pension scheme, regardless of what kind it is.
Default funds are best defined as what is used when a pension scheme member has not actively chosen a fund to invest in.
Beginning on 6th April, firms providing workplace pensions used by employers for automatic enrolment will have to cap charges within default funds to 0.75% per year of funds under management.
HR experts explain that those saving into a workplace pension should get value for the money they save, even if they aren’t actively playing a role in where their money is invested. The charge cap should help ensure this.
Additionally, under the new rule, firms won’t be able to pay for or receive consultancy charges and commissions for advice not expressly agreed upon by scheme members. Firms also will not be able to charge active and deferred members of schemes differently based on whether or not they are contributing to a scheme.
