Pensions  

How workplace schemes provide opportunities for advisers

  • Describe the FCA's role in workplace pensions
  • Identify the business opportunities for advisers from workplace pensions
  • Describe the TPR's influence over trustees of work-based schemes
CPD
Approx.30min
  • Upskill
  • Employ a professional adviser/ trustee
  • Consolidate into one of the large master trusts

The last two options are the most likely outcomes and are ones that many financial advisers could provide services to meet.

The Pension Schemes Act 2021 received Royal Assent in February and despite being watered down from the version proposed in 2020 it will still make significant waves across the pension and investment industries. The headlines are:

  1. Introduction of the pensions dashboard
  2. New criminal offences for trustees and advisers
  3. A new funding regime for defined benefit (DB) schemes
  4. Introduction of collective defined contribution (CDC) schemes
  5. Introduction of ESG into investment structures

The last three points all create new opportunities for financial advisers.

Ongoing factors to consider

Regulation

Despite the FCA and TPR saying they will work together, it is not yet obvious how this is happening. For example, in the last year or so we have seen them introduce different reporting standards, value for money assessments, and ESG implementation requirements.

Perhaps now is the time for the regulators to follow their own requirements and consolidate to create the value for money and better consumer outcomes they require of those they oversee.

Fees

In January 2021, the Department for Work and Pensions (DWP) confirmed there would be no change to the 0.75 per cent charge cap for defined contribution (DC) workplace pension schemes.

The price cap freeze was announced alongside the results of the government’s Pension Charges Survey 2020. Within the results, we find that the average charge being paid by savers is 0.48 per cent, which is significantly below the 0.75 per cent cap. 

Arguably, those advisers looking to evidence value for money will find the 0.48 per cent a useful benchmark when negotiating pricing with existing providers and potential new ones.

When it comes to fees there are two areas that advisers should be wary of within their research:

Opaqueness

There are a number of providers that combine two, three or even four different fees together to create the members cost and advisers should be sure to include them all in their due diligence assessments. 

One provider charges its members separate fees for the default fund, platform, and administration. These are then combined into an annual fee paid by the members. However, irrespective of whatever combination of fees are charged, the net balance payable by members tends to fall within a tight charging band. Which raises the question: why not just be transparent and have a standard fee?

Fixed fees

There are a multitude of different names and purposes given for fixed fees. However, they all result in savers paying a set monetary amount irrespective of the value of their savings and in addition to the annual management charge.

The government is mindful of the damage these charges can cause to those with the smallest pension pots. In January 2021 Guy Opperman, the Minister for Pensions imposed a £100 minimum level for when these fees can be charged.