Research and analysis

Pension charges survey 2016: charges in defined contribution pension schemes

This report summarises how charges in defined contribution workplace pension schemes have changed since measures were introduced in April 2015 and April 2016.

Documents

Pension charges survey 2016: charges in defined contribution pension schemes

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Summary: Pension charges survey 2016: charges in defined contribution pension schemes

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Details

Following the introduction of automatic enrolment (AE) in 2012, 10 million workers are estimated to be newly saving or saving more by 2018. Workplace pensions: update of analysis on automatic enrolment 2016 estimated that this will result in an additional £17 billion per year being saved into workplace pensions by 2019/20.

To improve the value for money of defined contribution (DC) workplace pension schemes used for AE, in March 2014 the Department for Work and Pensions (DWP) announced a comprehensive range of charges measures in schemes used for AE (qualifying schemes). These included:

  • a 0.75% charge cap on default arrangements in DC workplace schemes (with effect from April 2015)
  • a ban on consultancy charges in DC contract-based schemes (April 2015)
  • a ban on Active Member Discounts in DC workplace schemes (April 2016)
  • a ban on member-borne commission related payments in DC workplace schemes (April 2016)

We commissioned this report to measure charges applied across qualifying and non-qualifying DC workplace pension schemes open to new members. Respondents provided data for a reporting date on or after all the charges measures had been introduced on 1 April 2016.

The Pension charges survey 2015 provided the baseline data used in the 2016 research. Previous surveys in the series, using a different methodology, were conducted in 2011 and 2013.

The research findings will be used to:

  • measure the impact of the charges measures by comparing charges prior to their implementation (April 2015), to charges in the period after they had been fully implemented (April 2016)
  • inform the 2017 government examination of the level and coverage of the charge cap

Authors: Andrew Wood, Peggy Young, Christoph Körbitz, Chloé Ramambason (Breaking Blue, formerly Bright Blue).

Published 26 October 2017