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<p>Private Pension schemes which are not used for automatic enrolment are free to
invest in funds with performance fees.</p><p> </p><p>To protect savers who are automatically
enrolled into a pension scheme and make no choice of investment fund, the Government
introduced a charge cap on 6 April 2015. Performance fees have always been subject
to the charge cap. However, the way that schemes used for automatic enrolment verify
compliance with the charge cap limits the use of most performance fees.</p><p> </p><p>Earlier
this year DWP consulted on proposals to extend the ways that pension schemes verify
compliance with the charge cap to accommodate performance fees (<a href="https://www.gov.uk/government/consultations/defined-contribution-pensions-investments-and-consolidation"
target="_blank">https://www.gov.uk/government/consultations/defined-contribution-pensions-investments-and-consolidation</a>),
as long as members invested over the whole year were not charged more than 0.75% of
their funds under management or an equivalent combination charge.</p><p> </p><p>Our
consultation met with broad support. We are considering next steps, but we do not
intend to remove performance fees – in any form – from the automatic enrolment charge
cap.</p>
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