As predicted, we had a statement on the DWP Charges Cap Consultation outcome yesterday.

As predicted, it did not provide the detail that employers and the pensions industry so badly need.

Before I give my considered opinion on this one, I will give you the full written text from yesterday’s announcement:

“The Minister for Pensions (Steve Webb MP): This government is committed to tackling high charges in workplace pension schemes. In particular, for those workers who do not exercise any choice, where they are automatically enrolled into a scheme then remain in the default fund.

Our consultation on pension scheme charging closed at the end of November. We continue to examine the responses, and will bring forward further proposals, in due course. However, one strong theme to emerge is about the timing for the implementation of any changes.

We remain strongly minded to cap pension scheme charges in the default funds used for automatic enrolment. However, we have consistently encouraged firms to start getting ready for automatic enrolment twelve months ahead of the time the new employer duties apply to them. Therefore, to give those employers at least twelve months notice of the rules that will apply to them; I can confirm that any cap on charges will not be introduced before April 2015.”

On the face of it this appears sensible and reasonable.

Indeed, and reading between the lines, there may even be the suggestion that the charges outcome will be announced by (say) April 2014, thus enabling employers staging from April 2015 to make the right scheme selection choices now. If that is the case, then this is a move towards a sensible outcome (and a small step towards the pragmatic approach to the Charges Consultation that I was strongly arguing for).

BUT…

What about all those employers in close proximity to their Auto-Enrolment (AE) Staging Date?

These employers need to make an immediate decision as to the scheme they will use for AE purposes. Employers want and need to make a scheme selection that will stand the test of time (and, more immediately, the Charges Consultation). Employers don’t want, and can’t afford, the extra time and expense of having to unpick their decisions just a few months down the line.

To make matters worse, there is no consensus of opinion as to where the charges cap will eventually settle. The Consultation suggested 3 different levels, and The Minister (and others) has suggested others since the Consultation began. And the longer this goes on, and the closer we are to the General Election, the more outside political influences could also be included in this key decision.

So employers close to staging date are clearly in a difficult position as a result of this delay. But how many employers are impacted? Well according to yesterday revised estimates from The Pensions Regulator, a mere 27,400 employers stage in the period of April to September 2014.

You have my sympathy if you represent one of the 27,400 organisations, or even an employer who has already staged and may yet need to revisit your decisions.

As ever, will keep you posted.

Best regards

Steve