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DWP gives firms breathing space on charge cap rules

The Department for Work and Pensions has bowed to pressure from stakeholder providers and accountants by giving them some breathing space to comply with the regulations.

Providers, accountants and trade bodies have been locked in negotiations with the DWP and Opra to get clarification on what falls within the 1 per cent charge cap, particularly on external fund links. The DWP concession follows the IMA sending out an urgent warning last month that tracker fund links on stakeholder may be under threat because charges on their underlying investments exceed 1 per cent because of their need to invest in FTSE 100 investment trusts.

The DWP has now told the ABI and the IMA that shares in investment trusts will be treated no differently from any other shares, meaning tracker funds do not have to include the und-erlying investment charges within the 1 per cent cap.

The Government admits that some of the stakeholder regulations are too tricky for providers to comply with and has sought legal advice.

Under the regulations, providers must employ an independent reporting accountant to audit schemes.

But accountants have highlighted the difficulties faced in deciding whether the charging rules are being broken.

The Government will look at the requirements of reporting accountants and has given companies until the end of the year to finalise annual declarations.

In a letter to the IMA and the ABI, the DWP says: “To allow time to look again at the requirements, ministers have now agreed to put back the time limits so that for this year only annual declarations will not fall due until December 31.

“The Government will enter discussions with representative bodies of the pension industry with a view to amending the requirements.”

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