Aviva will stop paying initial commission at the end of the year, when it will also end active member discounts and implement the 0.75 per cent charge cap on its modern schemes.
The announcement makes it the first provider to fully outline its stance on the DWP’s charging policy changes. Aviva says it will focus its workplace savings efforts on its small and medium enterprise heartland,
Aviva says it is implementing the DWP price cap changes early to help employers better manage automatic enrolment. DWP rules on these changes come into force in April 2015.
The provider will cap pension charges in its modern workplace pension default funds at 0.75 per cent. Leavers from AMD schemes will be charged the same price as the current active members, with the possible exception of schemes with charges of 0.35 per cent or below, which will be treated on a case by case basis. There will not be any
extended tie-in deals with employers.
Aviva says it will introduce an employer charge in a small number of schemes where the active charge on AMD is above 0.75 per cent.
It will stop paying initial commission altogether from the end of the year, but will continue trail commission until its ban in April 2016 to assist advisers moving to a fee- based structure.
The provider says it will reduce the charges for non-AMD schemes where ongoing commission will stop in 2016.
More than 600 employers have completed their automatic enrolment staging with Aviva to date, the majority of them being SMEs.
Aviva stopped writing schemes with consultancy charges in June 2013 and also unwound the small number of schemes that had been written.
In response to the recommendations made in September 2013 by the Office of Fair Trading (OFT), following its market study, Aviva immediately stopped offering new AMD schemes. And when the DWP announced plans to cap charges in October 2013, Aviva stopped offering new schemes above 0.75%, six months before most of the market.
Aviva managing director, workplace savings Brian Gabriel says: “Aviva is committed to supporting advisers and employers with the incredible amount of change they are going through when it comes to workplace pensions. The changes we’re making mean that employers, employees and advisers have clarity on how Aviva is managing these changes on their behalf, and we know the SME market is looking for this direction from us.
“We are being clear about how and when we plan to implement the DWP changes so that advisers can have the right conversations with their employer clients and make informed decisions, particularly around their automatic enrolment preparations.
“The SME market in particular, which represents the majority of our corporate pensions business, is looking for value for money solutions that includes pensions and broader employee benefits, as well as guidance and tools to help with implementation. Aviva has developed an end-to-end range of solutions to meet these needs.”