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.
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