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Scottish Widows reveals auto-enrol charge cap plans

Scottish Widows will remove initial commission in November this year ahead of the implementation of the auto-enrolment charge cap in April 2015.

Following reforms announced by the Department for Work and Pensions in March, all schemes used for auto-enrolment will need to charge 0.75 per cent or less. Schemes with adviser commission and active member discounts will be prohibited from April 2016.

Scottish Widows plans to remove ongoing commission in April 2016 and cap all active member discount charges at the active rate plus five basis points, subject to a 35 basis points floor.

The firm also says it plans to invest around £20m a year in its corporate pensions proposition.

Scottish Widows director for corporate propositions David Holton says: “This announcement provides a clear road to compliance in challenging timeframes that treats customers fairly and is transparent, while at the same time confirming our long-term commitment to the market through significant investment.”

Earlier this year, the provider revealed implementing the pension charge cap would cost the business £100m. Rival insurer Standard Life this week made a £160m provision in its accounts in relation to the cap.

Aegon, Aviva, Standard, Friends Life and Royal London have already confirmed how they plan to implement the charge cap.

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