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Govt to exempt AVCs from pension charge cap

Additional voluntary contribution schemes where members have made a choice about investments will not be subject to the 0.75 per cent charge cap on auto-enrolment schemes.

The Department for Work and Pensions plans to amend rules that would have meant AVCs used within qualifying schemes where members do not make an investment choice would have been subject to the cap.

It says this would be an “unusual scenario” but that “this impact was not intended and schemes will have been preparing for the introduction of the charge cap on the basis that such arrangements would not be in scope”.

Following a technical consultation, the Government says it will change regulations “so that no arrangement solely receiving contributions which are AVCs will be a ‘default arrangement’ and so subject to the charge cap”.

However, AVCs used as a default scheme for other workers of the employer will still have to comply with the cap.

The charge cap comes into force in April 2015. The consultation closes on 24 March 2015.

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