UK - The department for work and pensions (DWP) is scrapping plans for a charge cap on default funds in workplace personal pensions (WPPs) following industry feedback, while Northumberland County Council is seeking a UK bond manager for its pension scheme following concerns about its current manager, ECM.

In September the DWP set out draft guidelines for operators of WPPs, including group personal pensions (GPPs) on the design of the default fund. This included a section on affordability where the total charges for the fund should be below the stakeholder price cap of 1.5% for the first 10 years and 1% thereafter. (See earlier IPE article: UK: WPP default fund charges ‘should have stakeholder cap’)

However in its response to the feedback to the consultation, the government confirmed that it plans to remove all references to the stakeholder pension price cap. Instead it confirmed it would continue working with the industry on “rewording the affordability principle so that consumers are protected whilst not stifling innovation within the industry nor being overly prescriptive”.

In addition the response document also revealed the scope of the guidance will be extended to also include occupational pension schemes’ default funds, while also conducting further research into the areas of responsibilities, charges and common benchmarks. Therefore, the DWP predicted that amended guidance on default funds, for both occupational and WPP schemes will be issued for consultation later this year with the final guidance expected in spring 2011.

Elsewhere Northumberland County Councilhas issued a tender notice for a specialist active UK bond manager for its £667m (€744m) local government pension schem following concerns with its incumbent manager, ECM.

The council confirmed it is seeking a bond manager to run a portfolio valued at approximately £67m, or 10% of the fund, in an open-ended contract to be reviewed every three years.

Documentation from the county’s last pension fund panel meeting revealed the bond portfolio had been put up for tender following concerns over the “significant volatility of performance” by the existing bond manager, ECM, in the last 18 months.

The closing date for the tender is 22 April 2010 and further information can be obtained from Northumberland Council’s procurement department.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

Topics