An active member discount means that a non-contributing member pays higher charges than a contributing member. This was not allowed since 6 April 2016.
Add on services are those over and above the main services provided by the scheme, such as designing and implementing an investment strategy, investing contributions to the scheme, holding members' investments and transferring into the default arrangement or out of the arrangement into a different arrangement, fund or scheme.
A maximum charge of 0.75% per year of funds under management (excluding transaction costs) will apply to any identified default arrangement for all qualifying pension plans. This is commonly referred to as the 'charge cap'.
A plan is contract-based where an employer appoints a pension provider, such as Prudential, to run the plan. The members sign a contract with the provider who will make the majority of decisions about the way the plan is run.
A default arrangement is:
- the arrangement into which members' contributions are directed where they have not made an active choice (the nominated default);
- and/or an arrangement into which at least 80% of members are actively contributing, at the relevant date (a deemed default).
Please note: the default arrangement(s) could each be a single default fund or a lifestyle option.
Defined contribution plans build up a pension pot using contributions from a member and employer (if applicable) plus investment returns and tax relief.
Defined contribution workplace pensions are a type of workplace pension plan where benefits are based on how much the member and employer pay into the plan, and also on the performance of the investments made with the money invested. This does not include individual personal pension arrangements even if the employer is paying a pension contribution.
Individuals employed by your organisation, between the ages of 22 and State Pension Age, working in the UK and earning above an 'earnings trigger' (currently £10,000 gross per year).
The FCA is responsible for regulating retail and wholesale financial markets and for supervising the infrastructure that supports those markets, including the standards of conduct for pension providers such as Prudential.
An Independent Governance Committee which must be established for all contract-based plans. This is a group of individuals who are independent of the plan and has a duty to act on behalf of members, in particular ensuring the plan offers value for money.
The role of the IGC is set out in the IGC Terms of Reference
The Pensions Act 2007 enabled the introduction of a national pensions plan, now referred to as the National Employment Savings Trust (NEST). Employers may use NEST to meet their obligations. NEST also has a public service obligation to accept any employer of any size. NEST is a trust-based occupational pension plan governed by a Plan Order and Rules.
In relation to automatic enrolment, this refers to a jobholder's right not to join the employer's plan. Note eligible job holders must be automatically enrolled before they may choose to opt-out and must exercise this choice during a one month opt-out period.
The gradual increase in minimum contributions for employers and eligible jobholders from the staging date to "steady state" (October 2018).
Qualifying Earnings in a pay reference period are earnings between £5,876 and £45,000. The Government reviews this band each year to keep it aligned with increases in earnings.
Qualifying earnings include: salary, wages, commission, bonuses and overtime together with statutory sick pay, statutory maternity pay, statutory paternity pay and statutory adoption pay. Regulations also prescribe other forms of remuneration to be included.
A Qualifying Pension Plan is any existing pension plan which meets the qualifying criteria for automatic enrolment.
For more information, please visit The Pensions Regulator website.
A minimum criteria, which must be achieved for defined contribution, defined benefit, hybrid and personal pensions plans, which will satisfy requirements under the regulations.
To find out more about the qualifying criteria that have to be met, visit the Pensions Regulator website.
Because of the significant numbers of employers who will be impacted, employers' duties will be staged over a five-year period between October 2012 and April 2017, with larger employers being staged first. New PAYE plans will be staged up until 2018 depending on when they are created.
The date at which ongoing contributions will 'level out' at the required minimum of: 3% of qualifying earnings with the remaining 5% paid by the jobholder or employer. Note this may include tax relief at a typical rate of 1% per year.
The Pensions Regulator (TPR) is the UK regulator of work-based pension schemes. The TPR work with trustees, employers, pension specialists and business advisers, giving guidance on what is expected of them.
The TPR also have functions and a statutory objective to maximise monitor compliance with the employer duties under that legislation relating to automatic enrolment.
The costs incurred as a result of buying, selling, lending or borrowing investments.
The period of time between the plan staging date and April 2019. During this period employers duties will be staged and contributions will increase.
A plan is trust-based where it is managed by a board of trustees. The trustees have full responsibility for the management, administration and investment of the plan. The trustees' duty is to act in the interests of members and while they can delegate tasks to various specialists, such as investment managers, the responsibility remains with the trustees.
This information is based on our understanding of the regulatory requirements affecting workplace pensions as at April 2017.