Consultancy charging could survive the auto-enrolment scheme ban on by setting up more generous parallel schemes says Thomsons Online Benefits chief executive Michael Whitfield.
Whitfield says consultancy charging could still be possible where the employer offers a scheme with contributions above the auto-enrolment level that employees are invited to switch to after they have been automatically enrolled into a qualifying pension scheme at the auto-enrolment minimum contribution level.
Alternatively, employees could be offered membership of a scheme paying more than the auto-enrolment minimum that met qualifying pension scheme standards prior to their actual or postponed staging date, with those not taking up the scheme being automatically enrolled into a scheme with minimum contributions. Whitfield believes this would be possible where schemes were for example offering 6 plus 6 per cent, compared to the auto-enrolment minimum of 5 plus 3 per cent.
He also argues the Government will face difficulties creating laws and regulations that preclude an employer from offering a better pension scheme just because it adopts a particular charging structure.
Providers have reacted coolly to the proposal, saying it goes against the aims of the Department for Work and Pensions, and suggesting that anyone adopting such a strategy could later find out regulators had extended the scope of their rules to outlaw such a procedure.
Whitfield says: “There is no reason why an employer can’t offer two schemes, and employees be given the opportunity to transfer into a more generous scheme than the one they have been automatically enrolled into.
“Low charges do not guarantee good member outcomes. And who is going to advise the 30,000 employers coming in Q2 of next year? I think they have outlawed consultancy charging because of a genuine fear of Nest failing.
“Of course the devil is in the detail. Having gone through this consultation process we are left with something very unclear from the DWP, even though we have had four and a half years to get to this point.”
Aviva head of policy, corporate benefits John Lawson says: “This does not feel like a proposition that will float and if people discuss it in public the government will change the rules. If I was an adviser I would be looking to retool my business to help employers with meeting their auto-enrolment requirements.”
Standard Life head of corporate proposition & strategy Jamie Jenkins says: “We have no plans to facilitate this sort of arrangement. This sounds like nothing more than a way of circumnavigating the Government’s planned new rules on consultancy charging. It would be a strange inducement to get someone to opt out of an auto-enrolment scheme, although it’s not clear it would necessarily be a scenario covered by the inducement rules.”