The Pensions Act 2014 received Royal Assent on 14May. The final regulations have not been published yet, but there are some measures in the Act worth knowing about.
For qualifying pension schemes, the Act sets out the framework to allow Government to cap charges, and to ban active member discounts and commissions. These changes are expected to come in from April 2015 and April 2016 respectively and are already having an impact on the market.
Some providers have decided to introduce some of the changes on a voluntary basis well ahead of the expected statutory dates. Others will need to revisit and potentially reprice existing schemes that will be used for auto-enrolment. Advisers will need to consider how the ban on commission might impact their income streams.
Auto-enrolment could mean that many people will end up with small pension pots all over the place when they move jobs. To tackle this, the Act sets out the framework to allow the automatic transfer of pensions between auto-enrolment schemes. Short service refunds from trust-based defined contribution schemes will therefore be banned.
The Act also requires the Government and the FCA to introduce rules for DC schemes and providers to publish detailed information on the charges that apply in a scheme. This should make it easier for advisers and employers to compare providers.
Finally, the Act sets out the framework for a single-tier state pension. With the increase in state pension age to 67 from 2036 and the ability for some to buy more state pension, this might mean clients will need to revisit their retirement planning.
Jamie Clark is business development manager at Scottish Life