The ban on consultancy charges should be extended from AE schemes to all qualifying DC schemes, says the Department for Work and Pensions in its consultation published today.
The DWP consultation Better Workplace Pensions: A Consultation on Charging, argues that schemes set up prior to September 2013 when the ban was put in place should also be unravelled.
Since September 2013, the use of consultancy charges in automatic enrolment schemes has been banned following a DWP review that found they posed a significant risk of scheme member detriment. The DWP argues that the decision to ban consultancy charges received widespread support in Parliament, among consumer groups, and from the market.
The consultation says: “It is important to protect all savers and not just those in automatic enrolment schemes. As such, the Pensions Bill currently before Parliament contains a clause which broadens the existing powers, enabling the ban on consultancy charging to be extended to all qualifying schemes.
“This would mean that consultancy charges agreed before 10 May would have to stop for both new and existing members if the scheme is being used to comply with automatic enrolment duties. We are mindful, however, that these regulations could potentially cause some disruption to pension providers.”
The consultation will ask:-
How are the existing regulations working in practice and how are services now being delivered and paid for?
How are charges for blended funds structured, their level set and what disclosure is in place for members and employers?
What impact would extending these regulations to qualifying schemes have on providers, employers, advisers and any other third parties, and what if any transitional arrangements would be appropriate?