The government has banned consultancy charges on auto-enrolment pension schemes.
Consultancy charging, introduced under the retail distribution review, which came into effect at the end of last year, enabled employers to pay an adviser for some of its pensions management work out of the employee’s or employer’s contributions to a member’s fund.
Jon Dixon, head of Chase de Vere’s auto-enrolment proposition, said: “For various historical reasons, the financial services industry is mistrusted by the end-user. The fact that [pensions minister Steve] Webb and the Department for Work and Pensions have seen fit to create a mechanism that means that every pound that is saved into workplace pensions has maximum impact is unquestionably the right thing to do.”
But there are some concerns that the ban could be too simplistic and prevent some employers seeking advice. Jacqui Piper, associate in the pensions team at law firm Shoosmiths (pictured), said: “The ban will stop a lot of employers from getting advice. A better approach would be to restrict the types of charge that could be passed on to members and combine that with greater transparency.”
The government is yet to confirm details of the regulations and whether it will apply the ban retrospectively. If it does not do so, this could create a two-tiered charging structure.
“Larger employers can afford to absorb the costs, while smaller employers might not be able to do so,” Piper added.