Costs and charges

Since 2012, increasing attention has been given to the charges borne by members of work-based pension schemes, both in terms of the nature and level of these charges. This arose out of a concern that members of defined contribution (DC) schemes, especially work-based schemes which are subject to auto-enrolment requirements, were not getting value for money from their pension investment.

There are now various restrictions applicable to charges borne by members in occupational pension schemes and workplace personal pension schemes.

Restrictions on member-borne commissions

Member-borne commissions are arrangements whereby the service provider remunerates a pension adviser for advice or services provided to members or an employer and recoups this cost by imposing increased charges on members' pension pots.

The drive to restrict such commissions started on 31 December 2012 with the Retail Distribution Review (RDR), which resulted in pension providers of new group personal pension schemes, group stakeholder schemes and group self-invested personal pension being banned from paying commission to advisers.

For further information, see Practice Note: The Retail Distribution Review and pensions [Archived].

On 6 April 2016, the ban was extended to apply to:

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Minister for Pensions hosts roundtable on ‘Pound for Pound’ initiative in shift from cost to Value for Money

The Minister for Pensions, Torsten Bell MP, has hosted a roundtable with regulators and leading pension providers to support a joined-up approach to Value for Money (VFM) in pensions. The event marked the first public discussion of the ‘Pound for Pound’ (‘£4£’) initiative, aimed at shifting the UK market from cost-based comparisons to broader value-based metrics, shifting market conversations away from cost towards value. This shift is essential for the success of the government’s proposed approach set out in the Pension Schemes Bill 2025. Insights from Australia’s superannuation system were central to the session, highlighting how clear benchmarking, transparency and regulatory oversight have transformed both member outcomes and the understanding of value in Australia. Intended to inform the impending regulatory consultation on VFM metrics, the superannuation system formed a key reference point as the discussion explored how lessons from Australia and insights from providers could shape regulatory thinking and support the development of the Pension Schemes Bill. Roundtable participants including the Department for Work and Pension, the Financial Conduct Authority, Pensions UK and a number of the Mansion House Accord signatories, agreed that now is the time for government, regulators and industry to collaborate in shaping and embedding a robust, fit-for-purpose VFM regime.

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