CP26/40: Exempting performance fees from the workplace pensions charge cap

Read CP26/40 (PDF)[2]

Why we are consulting

In its current form, the cap limits pension schemes from considering asset classes where performance fees are more common – potentially reducing the value that they can deliver. This includes private markets such as private equity, venture capital and private credit funds.

The proposals recognise the benefits of removing barriers to private market investment where it’s in savers’ best interests. Providers will need to maintain strong controls when agreeing performance fees to make sure they are in savers’ interests.

We are also proposing additional safeguards covering transparency and scrutiny of how private assets are valued.

Supporting documents

We have also published a Technical Annex to the cost benefit analysis (PDF)[3] in the consultation paper.

Who this is for 

• Private asset fund managers.
• Firms operating contract-based workplace pensions.
• Independent Governance Committees (IGCs) and Governance Advisory Arrangements (GAAs).
• Trustees and sponsors of trust-based schemes.
• Defined Contribution (DC) pension scheme savers and beneficiaries.
• Pension scheme service providers, other industry bodies and professionals.
• Employers.
• Civil society organisations.
• Consumer organisations / representatives.
• Pensions administrators.
• Any other interested stakeholders.

Next steps  

Online response form[4]

Send us your comments by 14 January 2027. You can respond using the online response form or by emailing [email protected].

We currently expect to make final rules in summer 2027 after considering feedback.

Background 

The charge cap was introduced in 2015. It limits charges to 0.75% of funds under management in workplace default pension funds. The cap was introduced because employers may have limited ability to influence the charges applied to their employees’ pension savings and to ensure all savers would benefit from lower charges.

In 2023, the Department for Work and Pensions (DWP) exempted certain performance fees[5] from the charge cap to support pension fund investment in private assets. Our proposals seek to replicate existing legislation and statutory guidance[6] for trust-based schemes. In a limited number of areas, we also propose additional safeguards and clarifications reflecting developments in the market since 2023 and recent supervisory insights.