Consultancy charging banned from today as defaults face charge cap
Consultancy charging has been banned for auto-enrolment schemes and default fund charges could be capped under a consultation to be published this autumn.
In a written ministerial statement issued today pensions minister Steve Webb pension said the DWP’s six month consultation had found existing measures to prevent advisers deducting high charges from members’ pension pots are inadequate.
It was also concerned that consultancy charges can have a disproportionately negative impact on people who move jobs regularly.
The ban applies to both occupational and contract-based schemes. Schemes already written on a consultancy charging basis will not have to be unwound.
The Government will publish a consultation this autumn, in light of the forthcoming OFT report on the workplace pensions market setting out proposals including a cap on default fund charges in DC schemes.
Webb 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 their findings.
In January, the OFT launched a market study to examine whether defined contribution workplace pension schemes are set up to deliver the best value for money for savers. A key aspect of its investigation is whether there is sufficient pressure on pension providers to keep charges low, and the extent to which information about charges is made available to savers.”