Govt keeps auto-enrolment cap at 0.75%

The government has decided to put on the back burner any change to the auto-enrolment charge cap and will keep it at 0.75%. In a written answer to a question in the Commons, Pensions Minister Guy Opperman MP said the government now completed its examination of the cap that applies to default investment funds within defined contribution (DC) pension schemes used for automatic enrolment (AE).After seeking industry and consumer views and considering the findings of the recent Pension Charges Survey, which captured data from providers covering 14.4 million scheme members, he said: “We do not feel that now is the right time to change the level or scope of the cap.“The cap is working broadly as intended, helping to drive down member-borne costs, whilst allowing flexibility to allow asset diversity or tailored services for members and employers.“It appears some small schemes are less able to take advantage of the most competitive market rates, and we have launched proposals to simplify the scheme consolidation process. This will allow smaller schemes who cannot secure value for money in the long term to exit the market and secure a better deal for their members elsewhere.”Mr Opperman agreed that there “continues to be a lack of transparency on transaction costs, which is hindering trustees and Independent Governance Committees’ (IGC) attempts to monitor and evaluate whether these represent value.” However he said it was vital that the government got disclosure right before deciding on whether a cap on transaction costs is appropriate.Recently the DWP announced legislative proposals to ensure trustees have sight of all costs and can give that information to members. The FCA is developing similar rules for providers.He added that the government remains committed to ensuring AE members are protected from “unreasonable and unfair” charges, and recognises that there is concern among consumers.The government intends to actively monitor the situation and review the information which trustees of DC schemes will be required to publish from April 2018, and which providers will publish in due course, to monitor whether the downward trend in charges is continuing.This will feed in to the DWP’s next review. In 2020 it intends to examine the level and scope of the charge cap, as well as permitted charging structures, to see whether a change is needed to protect members.“This will also allow us to evaluate the effects of the next stage of AE and the new master trust and transaction costs regimes,” he said.He said there may be a much clearer case for change in 2020.

Govt keeps auto-enrolment cap at 0.75%

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