Christopher Stiles: What is the effect of the delayed pension charges cap?

Most employers will welcome the news that the proposed cap on charges for auto-enrolment pension schemes will not be implemented before April 2015.

That is not to say there is anything wrong with the aim, which is to help ensure that the schemes employers are providing for their employees represent value for money, although a cap on charges is a simplistic solution to that problem.


Employers do not have a strong commercial motivation to minimise charges (it is the member that shoulders them), and even if they did, they may not have the bargaining power to do much about it.

Potential disruption

Although the issue of the charges themselves is not a direct concern for employers, the possibility of a cap had the potential to disrupt their planning for auto-enrolment. This could have had a widespread impact because the staged introduction of auto-enrolment has now reached small and medium-sized enterprises.

Planning for auto-enrolment is complicated enough already. The concept is simple enough, but the legislation implementing it is somewhat over-engineered (and many would describe it less kindly).  

The government has recognised that it cannot tell employers to plan for auto-enrolment 12 months ahead of their staging date on the one hand, while also introducing disruptive changes without a reasonable period of notice on the other.

Charges risk

As for what employers should be doing now, they should recognise that even though a charges cap will not happen just yet, the government remains committed to addressing the risk of charges unduly reducing the value of pension saving. 

Whether or not a charges cap will ultimately be introduced (and the forthcoming election might change things), employers, when providing pension schemes for their employees, would be well advised to focus on obtaining a competitive charging structure.

Christopher Stiles is an associate in the pensions team at Wragge and Co