The FCA has released its response to its recent consultation on workplace pension charging and the associated rules changes, including its policy statement and final rules. These rules changes are derived from a 2013 OFT report that suggested that the market alone would not deal with the wide range of charges and lack of transparency in the workplace pension market.
In short the scheme governance body of any FCA regulated workplace pension providers with more than one member will be required to:
- Provide information on the scheme’s transaction costs and the administration charges imposed on scheme members, for each default arrangement and each alternative fund option that the member is able to select, in the annual Chair’s report (though this may be limited to default options if information on a publically available website);
- include an illustration of the compounding effect of the aggregated costs and charges (again potentially limited to default fund information); and
- publish all costs and charges information for all funds, free of charge, on a publicly available website (thereby providing a back up to the Chair’s statement if this only includes the default funds).
Additional information can be provided (as long as this does not obfuscate the key information) and appropriate warnings should be given.
The information will need to be provided at least yearly and within 7 months of the end the relevant scheme year (defined in the rules as the period between 1 January to 31 December, making the deadline for publication 31 July in the following year.) Based on feedback from the industry relating to practical implementation there will be a transitional period for the 2020 scheme year under which only information on default arrangements will be required (with a deadline of 31 July 2021).
In general terms these requirements mirror those applicable to trust based schemes regulated by the DWP with some modifications to reflect the difference in legal structure between the DWP’s schemes and the FCA’s schemes and it is to be hoped that this new information will allow members to compare their options when deciding how to use their workplace pensions savings.