The government’s moves to protect employees from high and inappropriate pension charges is something of a double-edged sword.
Last month’s announcement that consultancy charging is to be banned for auto-enrolment schemes is good news for staff who, under this remuneration structure, could have seen high charges deducted from their pension pot.
Along with the ban on commission for new schemes brought in by the retail distribution review, pension minister Steve Webb’s latest announcement will, ultimately, increase transparency and make it easier for employers to know exactly what they are paying advisers for.
However, as advisers move towards fee-based remuneration, employers may find they are now required to pay for services they previously received under a commission deal and perceived to be free, even though this was not the case.
With employers’ costs likely to come under greater scrutiny, this could lead to some key services being quietly dropped.
Financial advice is a prime example, yet, as many staff enter a workplace pension for the first time under auto-enrolment, this is just when they need education and advice the most. Without the right information and tools to help them understand why saving for the future is so vital, the likelihood is that some will opt out because they have more immediate priorities for their cash.
With employers under pressure to support staff, the challenge is to do so without necessarily increasing costs.
Follow Debbie on Twitter: @DebbieLovewell