Standard Life will remove commission from all auto-enrolment pension schemes from April 2015 if the payment brings the charge above the Government’s 0.75 per cent cap.
Pensions minister Steve Webb revealed in March plans to place a 0.75 per cent price ceiling on all auto-enrolment default funds from April next year.
The Government will also ban active member discounts and adviser commission from workplace pension schemes from April 2016.
In response, Standard Life will remove all funded initial commission by the end of 2014 before cutting off commission on schemes with a charge above the cap in April 2015. The provider says where commission is removed this will be reflected in the charge paid by the scheme member.
Where an existing scheme has a charge above 0.75 per cent and no adviser is involved, Standard Life will reduce the price to meet the charge cap.
The provider says: “Standard Life hasn’t paid commission on new schemes for some time however on some older schemes we do still pay some types of commission.
“One of the impacts of the charge cap is that we will no longer be able to recoup funded commission from charges and therefore we intend to remove it by the end of 2014.
“To support advisers on their transition to fee based remuneration we will in some cases offer fund based commission in its place until the ban comes into force. Remaining commission will continue to be paid until 2016 if it doesn’t impact the charge cap or April 2015 if it results in prices being above the charge cap.”
In addition, Standard Life will “upgrade” all existing schemes with a staging date later than April 2015 to the company’s flagship ‘group flexible retirement plan’. This offering will allow members access to drawdown so they can take advantage of the new flexibilities announced in the March Budget.
Finally, all active member discounts will be removed for schemes with a staging date after April 2015 as part of the upgrade. For AMD schemes with a staging date before April 2015, a new price will be negotiated on a case-by-case basis.