DWP permitted charges within Defined Contribution pension schemes: PLSA response
On the 24th May 2021, the Department for Work and Pensions (DWP) opened a consultation on the policy around the implementation of the de minimis and also on the Statutory Instrument required to bring about this change. They also sought views on a proposal to move to a single, permitted universal charging structure for use within the default fund of qualifying Defined Contribution pension schemes used for automatic enrolment
The PLSA are supportive of the policy intent of the de minimis to prevent savers pots charging down to zero, however, focusing on restricting fee structures does not address the causes, only one of the symptoms, of the proliferation of small pots. We do not think the Government should move to a universal charging structure within the default arrangement. There are significant wider implications of moving to a universal charging structure. This would be a significant overhaul of the market for the purpose of allowing comparability of cost and charges. It is important to understand the wider strategy for the AE market as a whole and what the intended aims are. Other ways to improve comparability of costs and charges may be preferable rather than moving to a universal charging structure.