Personal Pension  

Government extends auto-enrolment charge cap exemption

Government extends auto-enrolment charge cap exemption

The Department for Work and Pensions has published a quick turnaround consultation on plans to extend a proposed exemption from the 0.75 per cent auto-enrolment charge cap applying to certain additional voluntary contributions to money purchase pensions.

It states that since laying out charge cap regulations - set to come into force next month - it has been made aware that an exclusion from the exemption, in cases where an arrangement receiving AVCs is used to meet the basic auto-enrolment ‘duties’, does not “function as intended”.

As such, it plans to remove the provision and exempt all arrangements solely receiving contributions which are AVCs from the charge cap.

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It is seeking views on a technical change to the draft Occupational Pension Schemes (Charges and Governance) Regulations 2015, with a deadline set for contributions of Tuesday next week (24 March).

In a command paper last month, the government had said that an arrangement established for the purpose of receiving AVCs would not generally meet the criteria to be defined as a default arrangement subject to the charge cap.

Exemptions to this were where an arrangement is used by a scheme to fulfil an employer’s auto-enrolment duties for at least one employee - which would mean it was not solely receiving AVCs - or where members are not required to make an “active choice” over where contributions are invested.

“We understand that this is an unusual scenario as, in most cases, members making AVCs are required to choose the arrangement in which their AVCs are invested.

“However, this impact was not intended and schemes will have been preparing for the introduction of the charge cap on the basis that such arrangements would not be in scope.

“We still intend for AVCs to be subject to the charge cap where they are made to an arrangement which is designated as a default arrangement for other workers of that employer.”