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Providers in talks over cap-busting confusion

Product providers are believed to be locked in discussions with the Department for Work and Pensions and Opra over whether they are allowed to bust the 1 per cent charge cap on stakeholder and then rebate the difference.

There is confusion surrounding whether firms are allowed to exceed 1 per cent charges and redress the balance over a year or whether they must stick to charging no more than one-365th of 1 per cent a day.

Providers are believed to be working with the DWP and Opra to get clarity on how the 1 per cent charge cap is managed and supervised in practice, particularly on excess charges brought about by external fund links.

Reporting accountants for schemes are understood to have first raised the issue. They are understood to have expressed concern that busting the cap and then rebating may not comply with the regulations when they signed off the accounts.

Opra communications manager Nick Edmans says: “There is ongoing consultation looking at the practicalities of 1 per cent and supervising it without being unduly burdensome for firms. The regulations are not well written. We have to look at the intention to charge 1 per cent per annum and realistic methods for doing so.”

Clerical Medical pensions strategy manager Nigel Stam-mers: “The regulations are not definitive and different companies are applying them in different ways.

“The industry needs to get some certainty and confirmation of the detail. If most of the industry is breaking the rules, the Department for Work and Pensions and Opra need to be pragmatic about it.”

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Those with decent-length memories will recall that in the 2014 Budget statement George Osborne announced the new (and entirely unexpected) pension freedoms. The new rules come fully into force in less than two weeks.

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