Defined contribution schemes will have to declare compliance with the charge cap, as the Pensions Regulator updates its scheme return form to reflect April's legislative changes.
Trustees and managers of occupational DC plans are being asked to confirm they are operating in line with the 0.75 per cent default fund management charge cap on this year’s scheme return to the watchdog.
There will be some [schemes] that aren’t ready and these compliance aspects will be somewhat of a steep learning curve for them
Catherine McKenna, Squire Patton Boogs
New questions have been added to the scheme return to determine that charges imposed on members’ funds do not exceed the cap and are of a structure allowed by legislation.
In addition, schemes required to have a chair of trustees must provide details of the chair. For a trust-based scheme the appointed chair may be an individual trustee or a professional trustee body.
DC schemes with 12 or more members are required to complete an annual return, and notifications of return dates are sent between the months of May to December each year.
Once notified, schemes have six weeks to ensure compliance and complete the return.
Failure to complete the form or non-compliance could prompt further investigation by the regulator and warrant a fine.
Learning curve
Catherine McKenna, global head of pensions at law firm Squire Patton Boggs, said most schemes will have this requirement firmly on their radar and be primed to respond.
“Most have been going through the process of looking though their DC governance requirements in a number of different aspects,” she said, adding: “Inevitably, though, there will be some that aren’t ready, and these compliance aspects will be somewhat of a steep learning curve for them."
McKenna said many trustees view compliance as part of best practice in scheme governance but added the prospect of fines and penalties would drive other schemes to get up to speed on compliance.
“I would have thought if those schemes are doing their best to comply but can’t quite get over the line… the regulator ought not to be too heavy-handed with them,” she said.
David Spilsbury, DC client relationship manager at Barnett Waddingham, said many trustees are “ahead of the game” in meeting new compliance requirements.
“For those schemes that are well run, I don’t think this will come as too much of a surprise,” he said.
But Alan Morahan, principal in Punter Southall’s DC consulting practice, said schemes with complex pre-existing DC arrangements built around active managers and multi-asset funds may struggle to comply in time.
He said: “An overall view would be that schemes and trustees are going to be compliant, but for some this has been a challenge, particularly where they’ve had something very bespoke built for them."
