Consultancy charging ban 'extended to all qualifying pension schemes'
The ban on consultancy charging will extend to all qualifying pension schemes and not just those being used for auto-enrolment, Corporate Adviser understands.
The Department for Work and Pensions has told both providers and advisers that the Pensions Bill is to be amended to include a ban on consultancy charging on all qualifying pension schemes, including those set up as a more generous alternative to an auto-enrolment QPS.
The rule change is designed to stop intermediaries setting up parallel schemes offering higher than auto-enrolment minimum charges on a consultancy charging basis, with employees given the option to opt out of the auto-enrolment scheme into the more generous CC scheme.
The move has left some advisers calling for a level playing field between trust- and contract-based schemes. The DWP’s policy intention appears to be stopping consultancy charging on contract-based schemes but continuing to allow trust-based schemes to pay consultants charges out of employees’ pension pots.
Challenged as to whether intermediaries deducting charges from blended fund solutions would fall foul of the consultancy charging ban, a DWP spokesman is reported to have said: “This is not a priority area for us but we are still developing the detail of the regulations. Employers need to be able to understand what charges will be levied and what this price includes.”
Thomsons Online Benefits chief executive Michael Whitfield says: “There is now going to be a ban on all qualifying pension schemes. So it would be unbalanced if commission could still be paid out of trust-based schemes as well.
“What irritates me is the between £100m and £200m providers and advisers will have spent on attempting to deal with the consultancy charging rules that have been put before us.”
A DWP spokesperson says:“People need to know they are getting value for money when their employer enrols them into a workplace pension. That is why we have announced we will ban consultancy charges in automatic enrolment schemes.
“In the Pensions Bill we are broadening existing powers to limit charges in qualifying schemes, but further legislation would be required if we were to decide to extend the ban following the successful passage of the Bill.”
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