Regulator welcomes role in delivering member-borne commission ban
Tuesday 26 January 2016
The Pensions Regulator today welcomed its new role, subject to Parliamentary approval, to enforce a ban on member-borne commissions in occupational pension schemes.
In its formal response to the consultation 'Better Workplace Pensions: banning member-borne commission in occupational pension schemes', the Department for Work and Pensions (DWP) announced that regulations will be introduced preventing service providers from levying a charge on members in order to recover the costs of commission payments made to advisers.
As part of the Government’s decision and the accompanying regulations published for consultation, the regulator will be able to use its existing powers to enforce the ban directly on service providers, which includes issuing compliance notices and if necessary fines.
Andrew Warwick-Thompson, Executive Director for regulatory policy, said: “The ban on member-borne commissions is another important and welcome step towards ensuring pension savers get value for money.
"Assessing and securing value for money remains a key trustee responsibility for all pension schemes, and the ban will further support trustees in obtaining value for members of DC schemes.
“We are committed to protecting benefits for the millions of people saving for their pensions, and so we are pleased the draft regulations give us the ability to use our existing powers directly on providers. This is a new regulated community who may be subject to the use of our powers, and we will take this new role seriously.
“We will expect service providers to comply with the ban on qualifying schemes being used for automatic enrolment, and we will be issuing a number of direct communications to relevant groups in the coming weeks to educate them about our expectations.”
A regulatory duty will be placed on trustees or managers requiring them to inform their service provider whether the scheme they are managing is being used as a qualifying scheme for automatic enrolment.
It will be for trustees to confirm to the regulator in their scheme return whether service providers have confirmed compliance with the requirement not to impose charges on members that are used to recover the costs of commission payments to advisers.
However, it will be the responsibility of service providers to ensure that they comply with the legislation and where they fail to do so, we will consider the use our powers.
- You can find the DWP’s response to the consultation, including the draft regulations, at Banning member-borne commission in occupational pension schemes.
- A new question will be added to the July 2017 DC scheme return requiring trustees to confirm to us that they have received confirmation from service providers that the scheme does not contain commission payments.
- The Pensions Regulator is the regulator of work-based pension schemes in the UK. We have objectives to: protect members’ benefits; reduce the risk of calls on the Pension Protection Fund (PPF); to promote, and to improve understanding of, the good administration of work-based pension schemes; to maximise employer compliance with automatic enrolment duties; and to minimise any adverse impact on the sustainable growth of an employer (in relation to the exercise of the regulator’s functions under Part 3 of the Pensions Act 2004 only).
Matt Adams 01273 662086