Charge cap on the default arrangements of DC qualifying schemes

The following Pensions practice note provides comprehensive and up to date legal information covering:

  • Charge cap on the default arrangements of DC qualifying schemes
  • Legislative and regulatory framework for the charge cap
  • Where can the charge cap provisions be found?
  • Are there any differences between the two sets of charge cap provisions?
  • Which schemes does the charge cap apply to?
  • Qualifying schemes
  • Exempt schemes and arrangements
  • Application of charge cap on DC to DC bulk transfers without member consent
  • Meaning of default arrangement
  • Features of the charge cap
  • More...

Charge cap on the default arrangements of DC qualifying schemes

CORONAVIRUS (COVID-19) UPDATE: In light of the coronavirus pandemic, the Pensions Regulator (TPR) issued guidance stating that, until 30 June 2020, it would take a proportionate response to reports that the charge cap was exceeded because of temporary increases to costs due to coronavirus, provided the trustees took all reasonable steps to bring charges back within the charge cap as swiftly as possible. This easement expired on 30 June 2020.

Separately, where some self-selected funds were temporarily closed (‘gated’) during the coronavirus pandemic, defined contribution (DC) trustees should beware of inadvertently creating a default arrangement’ by diverting contributions into alternative funds. TPR has produced some guidance covering this issue.

For more information on the pensions implications of coronavirus, see Practice Notes: Coronavirus (COVID-19)—the pensions implications for trustees.
FORTHCOMING DEVELOPMENT 1: Building on two previous consultations (one on the consideration of illiquid assets and another on improving outcomes for DC members), on 18 March 2021 the government launched a third consultation entitled Incorporating performance fees in the charge cap which seeks views on proposed regulatory amendments.

The consultation also sought views on the current position on look-through in relation to charge cap compliance, as a potential barrier to investment in alternative asset classes. The current position is that trustees
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