Charge cap question and answers

Click on each question to see the answer.

For schemes established pre-RDR we will continue to pay existing initial and trail commission on new entrants and on increased contributions for current members until 5 April 2016 or the employer’s staging date if later.

For schemes established post-RDR that have an auto enrolment staging date after April 2015 we will continue to pay existing initial and ongoing consultancy charges (CC) on new entrants and on increased contributions for current members until the employer's staging date. We only support CC payments where these were agreed with the employer before 10 May 2013. For schemes that staged at or before April 2015, we stopped paying CC by 5 April 2015.

For schemes that stage after April 2015 - we will re-price schemes and stop consultancy charges from the employer's staging date.

For schemes that staged on or before April 2015 - we re-priced schemes and stopped consultancy charges by 5 April 2015.We will be stopping commission payments from schemes from April 2016 or the employer's staging date, if later.

No. We will re-price schemes individually at a market-competitive rate.

We want to be open and transparent about the stance we’re taking to give you certainty over how your remuneration is going to be affected in the future.

We remain fully committed to the intermediary market and recognise the pivotal role financial advisers play in making auto enrolment a success. We also understand that it may take some time to re-position your business to account for the reforms. That’s why we’re implementing these changes in a way that supports your business.

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.

Yes. The charge cap applies to the ‘default fund’. If an individual member makes an active choice to invest in external funds the charges are not capped and can exceed 0.75%.

We don't intend to introduce an employer administration charge for existing schemes at this time.

We want to be able to continue to support advisers and employers with running auto enrolment and qualifying schemes, but as a commercial business it has to be financially viable for us to do this. 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.

For new schemes we'll apply an employer administration charge where the average initial contribution per member is below £1,000 a year. This will enable us to accept business with average contributions below our previous minimum. The employer administration charge is £75 a month and this will be charged for the duration that the scheme remains active (i.e. regular contributions are still paid). From 2018, this charge will increase each year in line with the Retail Prices Index.

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 that employer with at least 90 days' notice of the change. 

We will confirm the revised terms for schemes approximately 6 months before the employer’s staging date.

For employers that staged by April 2015 we communicated the changes to employers and advisers by December 2014.

No. The changes will apply to both new entrants and existing members.

We currently support initial and ongoing adviser charges from Retirement Solutions group plans established post-RDR.

We hope to extend this functionality to pre-RDR Retirement Solutions Group Personal Pension Plans once commission is removed.

We also plan to allow ad hoc adviser charge payments from all Retirement Solutions Group Personal Pension Plans later in 2015. This will allow you to be paid for one-off advice/services provided to members.

Currently those schemes paying commission do not support adviser charges.

We have revised our permitted default investments for auto enrolment schemes. For new schemes it is not be possible to include external funds with additional investment charges within the default.

We contacted schemes with an external fund with additional investment charges in the default investment, that staged at or before April 2015, to arrange for the default to be changed to one of the permitted defaults by 6 April 2015.

We’ll contact schemes that stage after April 2015 approximately six months before their staging date. Where the default investment needs to change, this will need to happen by the employer’s staging date.

For more information about permitted default investments for auto enrolment please read our Default Investment Options Guide.

We’re updating our flagship Retirement Solutions group plans so they are compliant with the charge cap. Our legacy workplace pensions were not compatible with the requirements for qualifying schemes from 6 April 2015 as it was not financially viable to update our IT systems for a relatively small number of schemes. Employers with legacy schemes were offered a new Retirement Solutions group plan as our auto enrolment solution for their workforce.

This means we can administer our schemes more efficiently and also ensures employers are only able to access plan information for their current employees. We already move newly left service members from schemes and put them into their own individual 'continuation' plans. We are now extending this approach to those that have previously left employment but who have remained within their original scheme.

Moving these members into their own individual continuation plans also means that existing commission arrangements do not need to stop from April 2016, provided you are still acting as the adviser for these ex-employees. The existing product charges will remain unchanged on these plans.

These plans are closed to new contributions and if these members want to restart contributions alternative plans will be required.

Our priority is making sure our schemes are compliant with the new legislation from April, so in the short term we are unable to change the remuneration payable on a scheme, including the removal of commission.

The charge cap applies to all auto enrolment and qualifying schemes, so it’s not just auto enrolment schemes which we have changed, or will be changing.

The FCA’s final rules can be found here on the FCA website.

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. The firm is on the Financial Services Register, registration number 117672. It provides life assurance and pensions. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London, EC3V 0RL.