My Lords, we are committed to protecting members of workplace pension schemes from unfair charges. This is why we introduced a 0.75% cap on charges in the default funds of money purchase schemes used for automatic enrolment. This cap, which received cross-party support, has proved successful, with average charges in schemes used for automatic enrolment reducing by a significant margin. We want to ensure that members of collective money purchase schemes in Great Britain and Northern Ireland can be similarly protected, which is why we are tabling these amendments.
Our response to the consultation on delivering CDC schemes confirmed our intention to implement an annual CDC charge cap set at 0.75% of the value of the whole CDC fund, or an equivalent combination charge. The response also confirmed our intention that the scope of the CDC cap will be the same as the existing charge cap. Unlike the existing charge cap, which applies at member level, our intention is that the CDC charge cap will apply across the whole of the fund. This reflects the collective nature of these schemes and means that the CDC charge cap will apply to all members in the collective money purchase scheme, including pensioner members. Again, this reflects the collective nature of the schemes and the fact that the same fund will provide members with a variable pension income in retirement. We want to ensure that members of CDC schemes also benefit from other existing charge control measures, such as the member-borne commission ban and the early exit charge cap.
I will speak first to Amendment 15, which will amend the Pensions Act 2014 to ensure that the powers in that Act, under which we are able to provide for a charge cap and other charge control measures, can also be used in the case of collective money purchase schemes in Great Britain. We are amending paragraph 1 of Schedule 18 to that Act, which provides a power to prohibit by regulations certain charges in relevant schemes.
This is to make clear that regulations under this power can also be made in relation to collective money purchase schemes. As with the existing default fund charge cap for DC schemes, it is appropriate to use regulations to define the details of the cap and how it will apply. We will of course engage with the regulator and stakeholders in developing these details and will then consult on the draft regulations. We aim to align the application of the CDC charge cap with that of the existing charge as far as possible.
It is entirely appropriate that members of collective money purchase schemes benefit from similar charge control protections that apply to members of individual money purchase schemes. This amendment makes clear that regulations made under the powers in Schedule 18 to the Pensions Act 2014 can provide for controls on the charges borne by members in collective money purchase schemes. The amendment to paragraph 1 of Schedule 18 to the Pensions Act 2014 means that where a scheme which provides CDC benefits has more than one section, each section offering CDC benefits will be treated as a separate scheme for the purposes of the charge cap provisions. This is consistent with other provisions about how sections of schemes offering CDC benefits are to be treated and ensures that sections offering CDC benefits do not cross-subsidise other sections of the scheme.
The amendment to Section 54 of the Pensions Act 2014 means that the first regulations under paragraphs 1 or 3 of Schedule 18 made in relation to CDC schemes will be made by the affirmative resolution procedure. Section 54 already provides for the first regulations under these paragraphs to be made by the affirmative procedure, but regulations have already been made under these paragraphs. We wish to ensure that the first regulations made in relation to charge caps for CDC schemes have the same level of parliamentary scrutiny as those regulations did. Turning briefly to Amendment 16, this makes corresponding changes to Northern Ireland legislation to provide for a charge cap for CDC schemes in Northern Ireland. This will ensure parity of member protection for members of CDC schemes across the UK. I beg to move.