Draft regulations to cap defined-contribution (DC) pension scheme charges at 0.75% were put before Parliament in February, alongside additional governance requirements.
From April, scheme charges will be capped at 0.75% unless employees have specifically chosen a more expensive option.
In its response to a consultation on the introduction of a 0.75% cap on default funds, the government will now allow employers to breach the cap if defaulting members into schemes with life insurance contracts attached.
Employees with life cover written into their pension scheme will benefit from the change.
The cap could save DC scheme members £100,000 over the course of their working life, based on an average earner currently paying into a fund with a 1.5% charge, according to figures from the Department for Work and Pensions.
The Financial Conduct Authority (FCA) also made corresponding rules to control charges and the introduction of independent governance committees (IGCs) for workplace personal pension schemes from April 2015.
The role of IGCs will be to represent the interests of scheme members in assessing the value for money of pension schemes, challenging providers to make changes where necessary.
These rules, initially announced by the FCA in August, confirm to providers of workplace personal pensions the necessary detail to ensure that IGCs are set up by April 2015.
The FCA has confirmed that a review of the overall effectiveness of the new governance bodies will be conducted in 2017.
Christopher Woolard, director of strategy and competition at the FCA, said: “Pensions are complex and employees and ex-employees are often unlikely to know whether or not their workplace scheme delivers value for them. It is important that schemes are operating in the interests of members and IGCs are a significant step in a package of measures aimed at improving the value of workplace pensions.”
