Part 2 of the Charges & Governance Regulations 2015

The Occupational Pension Schemes (Charges and Governance) Regulations 2015 (the "2015 Charges and Governance regulations") originally came into force on 6 April 2015 and have since been amended.

Part 2 Chapter 1 of the 2015 Charges and Governance regulations requires that trustees and managers of a relevant, qualifying scheme must ensure that charges imposed on members' funds which are invested in their employer's default arrangement do not exceed a specified limit, and are not of a prohibited structure.

Furthermore, with effect from 6 April 2016, service providers are prevented from levying charges on members to recover the cost of any commission payments to advisers. Trustees are responsible for confirming, on the scheme return, both that they have complied with their duty to notify the service provider that the rules on commission payments apply, and that the restrictions have been complied with.

Part 2 Chapter 2 of the 2015 Charges and Governance regulations, which came into force on 1 October 2017, introduces a prohibition on early exit charges for members joining a relevant scheme on or after 1 October 2017, and caps the early exit charge for all other members.

Regulation 11B of the 2015 Charges and Governance regulations places an obligation on trustees and managers of a specified scheme to obtain written confirmation from their service providers that they are complying with the applicable restrictions in relation to commission payments. Where we reference 'charge restrictions' in this question, this is taken to include both the restrictions on charges and the confirmation requirements.

Part 2 chapter 1 requirements - charge restrictions and notification requirements

This question only needs to be answered if you answered ‘yes’ to the 2nd and/or 3rd question of the Automatic enrolment / qualifying schemes question. Even if you do not need to answer this question, you may still need to complete the question about Part 2 chapter 2 requirements - restriction on early exit charges.

Because you are being asked to confirm whether or not the restrictions on charges have been complied with in respect of each member, it is not possible to answer 'yes' to both 'a)' and 'b)'. These two responses are mutually exclusive.

However, depending on the circumstances you may need to answer 'yes' to either (a) or (b), and then select one or more additional fields. For example, you may need to do so if your scheme has more than one participating employer, and/or more than one default arrangement. In all cases, you should tick all that apply.

Questions (a) or (b) should be answered in respect of members to whom the charge restrictions apply. Question (c) should be answered in respect of any member for whom neither (a) nor (b) applies. You cannot tick both (a) and (b) but you can tick one of (a) and (c), (b) and (c), just (a), just (b) or just (c). 

What should I do if the restrictions on charges apply to one or more members of my scheme, were not complied with for a limited period, but have now been complied with for each member to whom they apply? 

If you have identified that your scheme was in breach of the restrictions on charges and that the scheme is no longer in breach we would encourage you to notify us in writing as soon as possible. Please provide us with details of the breach and how it arose, and what actions you took such that your scheme is now compliant in respect of each member to whom the restrictions apply.

Please also provide us with details of the steps you have taken or that you propose to take to assess the effect of the breach on members, and any proposals to remedy any member detriment. Once we receive this information we will consider whether any further action is required.

You will also need to notify us of the breach via the Scheme Return. Ideally, you should write to us setting out the information we have asked for above before you submit your Scheme Return. If you do not do this you may be asked to provide us with information which we may not otherwise require. 

When answering (a): The Part 2 Chapter 1 charge restrictions apply to one or more members and have been complied with for each of those members 

The charge restrictions are twofold. Firstly, there is a requirement to have permitted charge structures (which must not be changed in any scheme year) and secondly, deductions from funds held in a default arrangement(s) in respect of a member must not exceed the permissible charge level. You should only tick (a) if the charge restrictions have been complied with on both bases and in respect of each member to whom the restrictions apply. 

When answering (b): The Part 2 Chapter 1 charge restrictions apply to one or more members and have not been complied with for one or more of those members 

The charge restrictions are twofold. Firstly, there is a requirement to have permitted charge structures (which must not be changed in any scheme year) and secondly, deductions from funds held in a default arrangement(s) in respect of a member must not exceed the permissible charge level. You should tick (b) if the charge restrictions on either basis have not been complied with in respect of one or more members to whom the restrictions apply.

If you have identified that your scheme was in breach of the restrictions on charges during the current scheme year, but the scheme is no longer in breach, you will need to tick (b) to notify us of the breach. Please also write to us and provide us with details of the breach and how it arose, and what actions you took such that your scheme is now compliant in respect of each member to whom the restrictions apply.

Please also provide us with details of the steps you have taken or that you propose to take to assess the effect on the member of the breach and your proposals to remedy any member detriment. Once we receive this information we will consider whether any further action is required.

Ideally, you should write to us setting out this information before or at the same time as you submit your Scheme Return. If you do not write to us before or at the same time as you submit your Scheme Return, you may be asked to provide us with information which we may otherwise not require. 

When answering (c): One or more members do not fall into either of category (a) or category (b) because: 

There are a number of situations where neither (a) nor (b) will apply to one or more members. For example, the trustees/managers may not be in a position to confirm compliance with the charge cap for the first charges year because the first charges year has not yet been completed.

If neither (a) nor (b) applies to any member in your scheme, you should tick all of the options in (c) that apply. If there are other members to whom the charge cap obligations apply you will also need to tick (a) or (b) in addition to (c), where relevant. 

Adjustment measure 

You should select this option if you have already used the adjustment measure and are using permissible charging structures. Note that you cannot tick this option if your scheme does not use permissible charging structures.

You should not tick this box if:

Charges year 

Trustees/managers are required to measure charges over a charges year, which may be different from the scheme year or other year ends which the scheme uses for other purposes. You should select this option if your scheme has not yet completed its first charges year, although permissible charging structures are used. Note that you cannot tick this option if your scheme does not use permissible charging structures. 

The scheme has only one employer which is a company and which is also the sole trustee and the members of the scheme are former or current directors of the company and include at least one third current directors 

The 2015 Charges and Governance Regulations provide an exception to the charge restrictions for a certain type of scheme that meets the above specified criteria. This scheme is referred to in the regulations as an "executive pension plan", but you should note that many schemes which are called or thought of as executive schemes or executive pension plans do not meet these criteria and are therefore not exempt from the restrictions on charges. You should only select this option if the scheme for which you are responding satisfies all the relevant conditions. You may also wish to refer to the 2015 Charges and Governance Regulations, 'Interpretation' for the full definition of "executive pension plans" for the purposes of this exemption. 

Arrangements that are not default arrangements subject to the restrictions on charges 

The charge restrictions only apply to members' funds held in default arrangements. The 2015 Charges and Governance Regulations exclude certain arrangements from being "default arrangements", which means that such arrangements are not subject to the charge restrictions. In addition, some members' funds in default arrangements may be excluded from the restrictions on charges. If one of these exclusions applies in relation to members in your scheme, you should tick the applicable box below to indicate the exclusion that applies. 

Third party promise 

An arrangement containing a "third party promise" is not a default arrangement. To determine whether an arrangement provides for a third party promise, you should refer to Regulation 3 (6-8). Select this answer if these provisions are satisfied in respect of the arrangement. 

Employer not staged 

An arrangement in which members' funds are invested is not a default arrangement in relation to those members if their employer has not yet staged for automatic enrolment purposes. You should select this answer if a scheme employer(s) has not yet reached its staging date.

If there are other participating employers who have passed their staging date, members they employ may be subject to the restrictions on charges if they are invested in that employer's default arrangement. If this is the case, you may also need to select one or more of the further compliance questions on this page that apply in relation to those members. 

No contributions to that default arrangement 

The charge restrictions do not apply to deductions from a member's fund in a default arrangement where no contributions have been made to that arrangement in respect of that member since 6 April 2015 or the staging date of the employer to which the arrangement relates, whichever date is later. You should select this answer if, for a particular member, no contributions have been allocated to the arrangement since that date. 

For any other reason (please give details, maximum 250 characters) 

There may be other reasons why an arrangement is not a default arrangement subject to the charge restrictions for any member, for example it may be exempt because it only provides benefits attributable to additional voluntary contributions, or because it falls outside of the definition of a "default arrangement" . If so, you should select this option and provide details. 

Such members are not subject to the charge restrictions for any other reason (please give details, maximum 250 characters) 

You should select this option and provide details if one or more members are not subject to the restrictions on charges for any reason other than those specified above.

Part 2 chapter 2 requirements - restriction on early exit charges

This question needs to be answered even if you did not answer ‘yes’ to the 2nd and/or 3rd question of the Automatic enrolment / qualifying schemes question and did not need to complete the question about Part 2 Chapter 1 requirements - charge restrictions and notification requirements.

Because you are being asked to confirm whether or not the restrictions on early exit charges have been complied with in respect of each member, it is not possible to answer 'yes' to both 'a)' and 'b)'. These two responses are mutually exclusive.

If you answer ‘yes’ to ‘b)’, you should indicate whether your scheme is non-compliant in respect of members who joined the scheme before 1 October 2017, members who joined the scheme after 1 October 2017, or members in both categories.

What should I do if the restrictions on charges apply to one or more members of my scheme, were not complied with for a limited period, but have now been complied with for each member to whom they apply?

If you have identified that your scheme was in breach of the restrictions on charges during the current scheme year and that the scheme is no longer in breach we would encourage you to notify us in writing as soon as possible. Please provide us with details of the breach and how it arose, and what actions you took such that your scheme is now compliant in respect of each member to whom the restrictions apply.

Please also provide us with details of the steps you have taken or that you propose to take to assess the effect of the breach on members, and any proposals to remedy any member detriment. Once we receive this information we will consider whether any further action is required.

You will also need to notify us of the breach via the Scheme Return. Ideally, you should write to us setting out the information we have asked for above before you submit your Scheme Return. If you do not do this you may be asked to provide us with information which we may not otherwise require.

When answering (a): The Part 2 Chapter 2 requirements apply to one or more members and have been complied with for each of those members

An early exit charge is a charge which is only imposed, or imposed to that extent, if a member who has reached normal minimum pension age takes their benefit; converts benefits within the scheme, or transfers to a different scheme, before the member’s normal pension age.

There are different requirements for members joining the scheme before 1 October 2017 and members joining the scheme on or after 1 October 2017.

For members joining the scheme before 1 October 2017, an early exit charge may continue to be imposed but is limited to the lower of:

For members joining the scheme on or after 1 October 2017, the scheme must not impose an early exit charge.

You should only answer ‘yes’ to this part if your scheme complies in respect of all members.

When answering (b): The Part 2 Chapter 2 requirements apply to one or more members and have not been complied with for each of those members

If your scheme has not complied with the requirements for one or more members, you should select one or both categories of members for which the scheme is non-compliant.