Legal & General has introduced a £1,000 employer set-up fee for small pension schemes which is not covered by its 0.5 per cent auto-enrolment charge cap.
On Monday, L&G announced plans to cap charges on its default investment fund at 0.5 per cent.
The cap, which applies to both new and existing schemes, covers the annual management charge for administration of the pension and the fund charge.
An L&G spokesman says the provider introduced the flat £1,000 set-up charge for schemes with fewer than 500 members in May. The charge is paid for by the employer and so does not impact on the price paid by members.
The spokesman says: “We do not underwrite SME schemes so it’s necessary to charge the employer an implementation fee.
“This covers use of our unique eligibility software, linking to employers payroll, access for members to L&G ‘Choice’ software – which helps them through the auto-enrolment process – and support from our telephone based auto-enrolment technical staff so the employer can get help whenever they need it.
“The 0.5 per cent cap for members has only just become live so this implementation fee pre dates that. It does not impact on what the employees are charged.
“We have no plans to stop charging the implementation fee for auto-enrolment schemes using our default investment with less than 500 members although, in certain circumstances, we may choose to underwrite a smaller scheme in which case the fee would be waived.”
Rowley Turton director Scott Gallacher says: “The L&G announcement on capping charges was a bit misleading because clearly there are extra, unavoidable costs for small employers which fall outside the cap.”