Friends Life will continue to pay commission on auto-enrolment qualifying schemes with an annual management charge under the 0.75 per cent charge cap, then pass back cost savings to members through reduced charges in 2016 when commission is removed.
Responding to the Department for Work and Pensions commission ban rules for auto-enrolment qualifying schemes, the pension provider also stated that it will review continued commission payments on qualifying schemes with charges above the charge cap once regulations are clarified this autumn.
Initial commission will change to level commission for all new entrants to initial commission schemes from 6 September, for schemes on the firm’s New Generation Pensions and Bancs platforms only
For schemes where the default fund charge is already 0.75 per cent or below, initial commission for new members will be replaced with a level rate from 6 September.
Commission for existing and new members on schemes set up on a level, fund or renewal basis will continue until April 2016, when commission is removed in 2016 the cost saving will be passed back to members through a charge reduction.
For schemes where the default fund charge is currently above 0.75 per cent, initial commission for new member regular contributions will be replaced with a level rate from 6 September and commission for existing members or schemes set up on a level, fund or renewal basis will continue until further notice.
By April 2015, the firm will reduce the default fund charge to 0.75 per cent or lower with a possible review of commission terms, depending on the DWP’s final regulations.
Colin Williams, managing director of corporate benefits at Friends Life, said: “The volume of change the workplace pensions industry has experienced in recent years is unprecedented.
“We believe our two-phased approach to the commission ban and charge cap will help all parties make this transition as smoothly as possible.”
In April Friends Life was the first provider to axe Active Member Discounts. It has not actively offered initial commission schemes for over five years.
