Consultancy charges ban takes effect

Legislation to ban consultancy charging on auto-enrolment pension schemes came into effect on 14 September.

Steve Webb (pictured), minister for pensions, signed the new regulations, which aim to give greater protection to pension scheme members.

The legislation, which impacts defined contribution (DC) pension schemes used for auto-enrolment purposes, means an employer cannot receive advice under an agreement with a third party, other than a trustee, provider or scheme manager, and pay for that advice out of its employees pension pots or contributions.

In May, the government announced the results of a review into consultancy charges and its intention to crack down on inappropriate charges.

Webb said: “My job is to make sure people get better pensions. So when people put hard-earned cash into a pension, I am determined to make sure it doesn’t get gobbled up by charges.

“This ban will make the system fairer for anyone being automatically enrolled into a workplace pension.”

In the autumn, the government will consult over whether it should extend the ban to cover the small number of schemes which already had an agreement in place prior to 10 May, when Webb announced his intention to ban consultancy charges.