The Pensions Regulator has warned pension schemes that offering active member discounts is not “fair” or “acceptable”.
It has issued a statement warning trustees of defined-contribution pension schemes that it may take action if they choose a scheme which offers better rates to active members.
The regulator says: “Excessive costs and charges in a DC scheme can significantly reduce a member’s fund. Charging structures must be applied fairly to all categories of membership. Trustees must be able to demonstrate that they have assessed and concluded that the overall charging structures offer members value for money.
“The regulator does not view active member-only discounts (or deferred member penalties) as being fair and, therefore, acceptable.”
A TPR spokesman says it takes the same view of AMDs offered through contract-based pension schemes.
Last week, the Department for Work and Pensions extended its power to cap pension charges to include deferred scheme members.
Some of the UK’s biggest pension providers including Aegon, Aviva, Scottish Widows and Standard Life offer active member discounts.
Standard Life head of pensions policy John Lawson (pictured) says: “The regulator has effectively told trust-based schemes AMDs are not acceptable and they have to go. This is very disappointing because there has been no real debate. This is poorly informed policymaking.”
TPR executive director for DC June Mulroy says: “The build up of several small pension pots when members switch jobs is a challenge for the industry, but we believe it is unfair to address this by penalising deferred members.”