What is the charge cap?

The charge cap is a government-set limit. It’s the annual amount that can be charged to savers in default arrangements within defined contribution pension schemes used for auto-enrolment. Default arrangements are the investment fund or funds that an employer or scheme trustee have chosen for members who haven’t actively chosen a fund. The default arrangement for members of The People’s Pension who haven’t made an active choice is the ‘balanced’ investment profile.

The cap has applied since April 2015 and is currently set at 0.75% of funds under management within the default arrangement, or an equivalent combination charge. The cap applies to all scheme administration and investment charges, excluding transaction costs. This means it doesn’t currently include costs that are incurred by the investment manager when assets are bought, sold or lent by the fund.

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