Trustees of defined contribution (DC) schemes can choose to use the ‘adjustment measure’ so that the charge cap won’t apply for a particular default investment arrangement. Use our form to tell us you’re going to do so.
After 6 October 2015, you can only use the adjustment measure in exceptional circumstances.
- Tell the employer, members and us if you’re unlikely to be able to comply with the charge cap for a default arrangement in your scheme and wish to use the adjustment measure.
- Use the adjustment measure only in exceptional circumstances.
- Use our form to send the required information to us.
When you can use the adjustment measure
After 6 October 2015, you can only use the adjustment measure in exceptional circumstances. This is where an event happens which is outside the control of the trustees and where, despite your best efforts, you conclude that you’re unlikely to be able to comply with the charge cap because of that event for a particular default arrangement.
You must notify the affected employer(s), members and us at least one month before the date on which the adjustment measure will take effect.
You should take advice on how the charge cap and adjustment measure applies to your scheme.
Once you’ve implemented the adjustment measure the charge cap won’t apply to the affected default arrangement. However, your scheme still needs to have charge structures that are permitted by the Occupational Pension Schemes (Charges and Governance) Regulations 2015 where applicable.
How to use the adjustment measure
To use the adjustment measure you must satisfy certain conditions. This includes notifying the affected employer(s), members whose contributions have been paid to the default arrangement in the previous 12 months and us at least one month before you intend to use the measure. You must provide the date on which the measure will take effect.
If you decide to use the adjustment measure this will involve you either:
- allocating future contributions to a default arrangement in your scheme which is compliant with the charge cap
- no longer accepting contributions for members of the default arrangement that does not comply (which may entail closing the scheme)
Either way, you can give members the option of choosing to remain in the non-compliant default arrangement if they wish and have confirmed so in writing.
Once the adjustment measure has been implemented, and provided you have met the relevant conditions, the cap does not apply to the affected default arrangement.
You should download and complete our form to tell us that you’re using the adjustment measure. You can email it to us at firstname.lastname@example.org.
The Department for Work and Pensions has produced guidance on identifying which arrangements are affected and assessing charges.