09 November 2011
Note to the Press: Active member discounts – decisions please?
The Pensions Regulator recently described active member discounts (the practice of applying lower charges to actively contributing employees in money purchase schemes) as not being fair and, therefore not acceptable.
Richard Butcher, Managing Director of PTL, said: “There is little or no logical grounds for product providers to apply higher charges to members who stop contributing.
“That said, there are questions around this issue and we need the DWP and or the Regulator to make some decisions.
“In the case of a trust-based scheme, a discount would contravene the Preservation regulations. There are, however, lots of employers who would like to fund some of the expenses through paying an extra contribution specifically to cover admin costs. Why should anyone want to prejudice the employer's ability to look after their staff? To do so would be at odds with the principle of 'good member outcomes'. Does the Regulator plan to abolish this practice?
“In the case of contract-based pension schemes, such as personal pension plans, there is no legal bar on active member discounts. Are the DWP or FSA planning to change this? Certainly this difference is a factor the DWP should consider when comparing the two approaches.”