Our charge cap and commission stance

Supporting you through the change.
Further information
  1. For more details on the changes we're making, please read our Q & As or get in touch with your usual Royal London contact.
  2. See how and when we communicated the re-price to existing schemes
  3. FCA's final rules
  4. DWP's rules for occupational pension scheme

Our workplace pension charges have changed to comply with the new legislation capping default fund charges and banning commission and consultancy charging on qualifying and auto enrolment schemes.

Continuing to pay commission for new and existing members until April 2016

We're committed to the intermediary market which is why we are implementing these changes in a way that supports your business, primarily by:

  • Continuing to pay initial and trail commission for new and existing members until April 2016, or until the employer's staging date, if later;
  • Re-pricing schemes individually so the annual management charge (AMC) will be at a market-competitive price. We may charge some employers an administration charge so that we can continue to provide the same high quality of service. See details of how and when we communicated the re-price to existing schemes.
  • Adding ad hoc adviser charges to our group personal pensions.

1. Commission / Financial Adviser's Fee (FAF) and consultancy charges (CC)
  • We'll support CC until April 2015 or until the employer's staging date, if later, apart from schemes staging in January and March 2015, where the CC will be removed from the employer's staging date.
  • For employers with staging dates at or before April 2016, we'll continue to support initial and trail commission including FAF, until April 2016, at which point any payments for qualifying/AE schemes must stop.
  • For employers with staging dates after April 2016, we'll continue to support initial and trail commission (including FAF) and consultancy charges, for new and existing members, until the employer's staging date, at which point any payments must stop.
2. Product charges
  • We've reduced the maximum Annual Management Charge (AMC) for new Retirement Solutions schemes to 0.75%.
  • For schemes that staged by April 2015 - we capped the AMC at 0.75% for default funds by April 2015.
  • For schemes that stage after April 2015 – we’ll cap the AMC at 0.75% for default funds from the employer's staging date.
  • We're re-pricing schemes individually, so the AMC will be at a market-competitive price.
  • We removed charging structures with allocation rates of less than 100% which were available on older schemes.
  • For qualifying / auto enrolment schemes we removed any Financial Adviser's Fee (FAF) charges from members' plans by April 2015, or the employer's staging date, if later.
3. Employer administration charge
  • We want to be able to offer employers an auto enrolment scheme that helps them meet their employer duties. However, in a small number of cases it may not be possible for us to provide a qualifying scheme within an AMC of 0.75%.
  • We may introduce an employer administration charge for a small number of schemes to make them financially viable for us.
  • If the Government reduces the charge cap below 0.75% in the future, we reserve the right to introduce an employer administration charge as a standard charge for schemes. If this or any other change occurs that results in us needing to change the charges on a scheme, we'd provide the employer with at least 90 days' notice of the change.
4. Adviser charges
  • We understand that you may be looking at alternative revenue streams. So, where you're providing individual advice to scheme members, we can make adviser charge payments from the members' plans.
  • We currently offer initial and ongoing adviser charges on Retirement Solutions GPPs established post-RDR.
  • We'll be adding ad hoc adviser charge options to all our Retirement Solutions GPPs later in 2015. This will allow you to be paid for one-off or event-driven advice.
5. Default investments
  • We reviewed the default investments that we support for new and existing schemes and some employers changed the default by April 2015 where this included external funds with additional charges.
6. Paid up members
  • We'll move members who are not contributing and are no longer employed into their own individual 'continuation plans'. We haven't re-priced these plans and we'll continue to pay commission on these plans unless you or the member notify us that you're no longer advising them.

We re-priced schemes that staged by April 2015 and removed consultancy charges from April 2015.

We'll re-price schemes that stage after April 2015 from the employer's staging date. 

We'll be removing commission from the later of the employer's staging date and April 2016.

Examples:

Staging dateScheme re-priced and consultancy charges removedCommission removed

1 May 2015

1 May 2015

6 April 2016

1 Nov 2015

1 Nov 2015

6 April 2016

1 May 2016

1 May 2016

1 May 2016

From Monday 17 November we emailed you to tell you how each of your existing schemes that stage(d) before 1 Jan 2015 were affected by the changes and what you needed to do. You received one email per scheme. This email included a client summary that confirmed the terms and whether the current default investment fund was suitable or not. For schemes where the default was unsuitable from April 2015, we asked you to confirm a new default investment for the scheme.

Then from Friday 12 December, we emailed the employers to tell them about the changes to their scheme. For schemes where the default was unsuitable from April 2015, where you hadn’t already contacted us, we asked the employer to confirm a new default investment.

We continued to communicate with you, your clients and scheme members to:

  • keep you informed every step of the way, as the legislation came into effect;
  • confirm when we'd processed any changes.

February 2015

CommunicationAudienceMessages
External fund mailing email Advisers To alert advisers that we were mailing members of auto enrolment / qualifying schemes who we're not invested in the default investment and were in external funds with additional investment charges. We enclosed a sample copy of the mailing.
CC stopping email Advisers Re-confirmed to advisers with affected schemes that Consultancy Charges (CC) will be stopping from 6 April 2015.

March 2015

CommunicationAudienceMessages
External fund mailing Active members with funds with additional investment charges
  • Confirmed the default investment for their employer's workplace scheme and that it will be capped at 0.75% from 6 April.
  • Then confirmed which investment(s) their plan was invested in and that the charges for these investments could exceed 0.75%.
PUP/CPS mailing Employers & Advisers
  • Confirmed that workers who were paid up and no longer employed will be moved to a continuation plan (CPS).
  • This was be issued to advisers and employers for schemes that stage(d) from January 2015.

April 2015

Where changes were made to members' charges and/or investments we wrote to them to confirm the changes had been made.

Ongoing commitment to the intermediary market

We have taken the decision to continue to pay commission because we value the partnerships we have with advisers and recognise that it will take time for advisers to fully transition to a fee based model.

We believe that high quality advice is essential in ensuring customers achieve the best long terms savings outcomes for them.

We have a long term commitment to providing workplace pensions and enabling you to help SMEs design, implement and run successful auto enrolment schemes for their employees.

The charge cap presents serious challenges to workplace pensions but we believe by working in partnership with you that we can deliver value for money solutions for pension savers at the same time as preserving the long term commercial viability of the intermediated pensions market.

For further information, please read our Q&As or get in touch with your usual contact.

Last updated: 13 Nov 2014

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The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London EC3V 0RL.