Standard Life will stop paying initial commission by the end of 2014 and may increase AMCs of some active members as it unravels AMDs.
The provider will continue to pay ongoing commission on schemes below the charge cap until April 2016, but will where commission takes charges above the cap, this will be removed from April 2015. All commission will be removed by April 2016 as required by the DWP. Standard says scheme charges will be reduced to reflect the fact commission is no longer being paid.
Some schemes that stage before April 2015 will see increases in active members’ AMCs as their AMD charge structures are unraveled. The provider says it will look at these complex schemes on a case by case basis, but adds it has not built in a fee-paying proposition into its offering for this group of clients and is not looking at introducing a contribution charge.
For employers staging from April 2015 onwards, Standard will update existing clients to its new group flexible retirement plan option, which will offer drawdown as standard to all members. Existing schemes will remain paid up, meaning employees will have the option to transfer funds across but will not be moved en masse.
Pre-April 2015 stagers will see their AMCs reduced where they are not price-cap compliant in time for the DWP’s deadline.
Standard believes offering drawdown through its group flexible retirement plan option is a key factor in getting employers ready for the new post-budget environment, where employees will look to both contribute and make withdrawals as they approach retirement. Charging for drawdown functionality is yet to be finalised.
The provider also says it is seeing evidence of employers looking to change auto-enrolment scheme.
Standard Life workplace proposition director Graeme Bold says: “We are not taking a unilateral decision to reduce everyone to the active member charge, but we will have a good deal for the pre-2015 stagers. These schemes have complex needs and we will look at them on a scheme-by-scheme basis. We will continue to pay ongoing commission where we can until 2016.
“Our modern strategic lifestyle profile allows us to adjust asset allocation. So as we monitor the market and receive data on employee behaviour from employers we can adjust the asset allocation in the way we think best.
“Whereas employers had thought they were done with auto-enrolment, they are now starting to think how do they get access to the flexibility they need for their employees’ retirement. We think the proposition we have addresses this.”