The National Association of Pension Fund’s Pension Quality Mark (PQM) is lowering its cap on charges from 1% to 0.75% of pot size per year, which employers must meet before they can qualify for the nemchmark.
The change, which will come into effect from 1 April 2013, means that pension schemes applying for the PQM must prove that all charges paid by savers in the default fund do not exceed 0.75% per year. This covers all fees, including annual management charges (AMCs), administration, contribution and consultancy charges.
The new cap will apply to all scheme members, regardless of whether they actively contribute.
The PQM’s previous cap of 1% per year has been in place since its in September 2009.
Schemes that are already recognised by the benchmark will have an extra two years, on average, to meet the new charges standard. Schemes that applied for the PQM before 1 April 2013 must comply with the new standard by their first renewal after 1 October 2014.
Chris Hitchen, PQM chairman, said: “Up to 11 million people will be auto-enrolled into a workplace pension, so we have to change defined contribution pensions for the better.
“We want to push fees down so that savers can enjoy better pensions. Charges can have a huge impact on people’s savings, and our tougher new standard is a big step in the right direction.
“Pension charges have decreased since the introduction of PQM, but we don’t want these gains to be unravelled as auto-enrolment reaches medium and smaller-sized employers. These employers, and their workers, deserve information about what good defined contribution pensions look like, and that’s what PQM provides.”