Friends Life is offering all active member discount schemes the chance to move to a single charge at the current active member rate with immediate effect.
All members within these schemes whether active or deferred, will pay the current active member charge (AMC), subject to a minimum of 35bps. A minimum of 30bps will apply if a five-year commitment is agreed
The change means that all future deferred members will see no increase to their charge if they move employers or cease contributions.
Friends Life managing director, corporate benefits Colin Williams says: “The introduction of auto enrolment means that, under current AMD scheme structures, large numbers of employees pay higher deferred member charges on each pension they accumulate as they move between employers. We’re taking action now to remove deferred member charges.
“We have already started working with a number of our clients who proactively wished to move to a flat charge structure, at the active member rate, and we are now extending this offer to all of our clients with an AMD scheme.
“Due to the quality of our AMD portfolio and our relatively limited exposure we can make these changes for the benefit of our customers without a material financial impact on our business. We are aware that many AMD schemes in the market are on higher AMC terms and we are happy to consider offering a single AMC solution to schemes that wish to future proof ahead of the ban.”
“According to the 2013 OFT report into workplace savings there are approximately 10,000 schemes in the UK that currently use an active member discount. If all pension providers take the same stance as Friends Life, there will be a large number of members that stand to benefit.”
Hargreaves Lansdown head of corporate research Laith Khalaf says: ”Workplace pensions are getting cheaper and more transparent for those paying into them today, but older pots are in danger of getting left behind the times. Those who have older pension pots should dust them off and see if they still stand up to today’s standards. In many cases it may be possible to reduce charges, or get a better fund, or consolidate them to make them easier to manage. Employers are going to find this is just the tip of the iceberg in terms of the sort of changes which will need to be made over the next 12 months. Many will have to consider switching their default fund, or even their scheme, to comply with the new rules. What’s more, advisers can’t take commission anymore, so they are going to start asking for fees to cover their service, which should prompt an assessment of the value for money they provide.”