The DWP have published the full results and a summary document of the Pension Charges Survey 2016, which investigate the charges on occupation defined contribution pension schemes following the introduction of the charge cap of 0.75%.
The key findings are as follows:
• The charge cap had lowered charges in qualifying schemes to the level of the cap or below: as many as 98 per cent of members of qualifying contract-based schemes and 99 per cent of members of qualifying trust-based schemes now paid a maximum of 0.75 per cent.
• Among qualifying scheme members, the members of the smallest schemes, which previously charged higher than the cap, benefitted the most. For example, ongoing charges for qualifying contract-based schemes with 12 or fewer members fell by 0.2 percentage points on average.
• Non-qualifying schemes, whose charges are not subject to the cap and were already typically higher than it, had not generally brought down their charges in response. In non-qualifying contract-based schemes just 21 per cent of members paid charges within the cap; and in non-qualifying trust-based schemes 50 per cent of members paid charges within the cap – both showing little change since 2015.
• Charges for unbundled trust-based schemes, measured for the first time in the 2016 survey, were typically comparable to their equivalent bundled trust-based schemes, although a relatively small number of closed, non-qualifying schemes charged markedly higher than the average.
• ‘Legacy’ charges that were banned under the charges measures (i.e. Active Member Discounts (AMDs), consultancy charges and member-borne commission) had been eliminated from qualifying schemes, and remained extremely rare even among non-qualifying schemes.
• There was virtually no improvement in providers’ abilities to report on transaction costs compared to 2015, with many providers, unbundled scheme trustees and their fund managers awaiting further guidance from the Government.
It is clear that the charge cap is working and those who were in high charging smaller schemes have benefitted the most. It is a shame that those schemes not currently impacted by the cap haven’t reduced their charges in line with other schemes but there may well be good reasons for this.
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