The government has banned consultancy charges for auto-enrolment pension schemes.
The move aims to protect employees from high and inappropriate pension charges.
It follows a six-month-long review of consultancy charges conducted by the government, which concluded that existing measures to prevent advisers deducting high charges from members’ pension pots are inadequate.
The review also found that consultancy charges can have a disproportionately negative impact on people who move jobs regularly.
The ban will apply to occupational and personal pension schemes, and the government intends to lay regulations before Parliament as soon as possible.
The government also plans to publish a consultation this autumn, in light of a forthcoming Office of Fair Trading (OFT) report on the workplace pensions market.
The consultation will set out proposals including a cap on default fund charges in defined contribution (DC) pension schemes. Legislation contained in the Pensions Bill (published on 10 May) will enable the government to take targeted action.
Steve Webb, minister for pensions (pictured), said: “With millions of people taking up pension saving for the first time under automatic-enrolment, we have to give people confidence that they will get good value for money.
“That is why we are banning consultancy charges, where scheme members end up paying for advice given to their employer.
“In addition, the OFT is investigating the whole workplace pensions market and we will act promptly and vigorously later this year in the light of its findings.”
Time Jones, chief executive officer of Nest, added: “We were concerned that consultancy charging could have been detrimental to specific groups of customers and, more generally, damage the reputation of automatic-enrolment. We welcome that potential being removed.”
So once more the press releases make it sound like the pensions advisers are ripping employees off! The ban means an extra cost to the hard pushed employers at the worst possible time or could it just be that it will mean more employers just default into NEST to avoid the cost of advice bu then they will have to make sure everything runs smoothly themselves which will cost them a lot in the long run. The more that go into NEST the better it looks for those who wanted it set up. This does all beg the question about how NEST can charge 1.8% of every premium to cover a loan they should never have had when this cost does NOT benefit the employee – the whole thing is a farce. As usual the powers that be make mistakes and somehow blame the pension advisers and make it sound like they are rescuing people from greedy advisers. Someone should start on NEST now and get the 1.8% charge removed as well – it’s only fair.
I really like to read an article that confirms there are writers that can get their point across without confusing their readers. You have done an excellent job with this.