View more on these topics

ABI: Charge cap puts success of auto-enrolment at ‘severe risk’

The Association of British Insurers has warned Government proposals to cap pension charges in April will put the success of automatic enrolment at “very severe risk”.

In October, the Department for Work and Pensions  revealed it was considering three options three options for capping charges on auto-enrolment default funds.

The consultation, which closed last month, sets out possible charge caps of 1 per cent, 0.75 per cent or a two-tier “comply or explain” cap.

Policymakers have proposed introducing the cap in April for all employers staging from April 2014 onwards before extending it to employers who staged between October 2012 and March 2014 by April 2015.

In its response, the ABI says introducing an auto-enrolment charge cap next year, alongside a possible ban on active member discounts and in-built adviser commission, will create “further burden and confusion” for employers and place a “very severe risk” on the delivery of auto-enrolment.

The trade body also accuses the Government of “moving the goal posts” months before the staging dates of tens of thousands of employers and warns, if set too low, a charge cap will lead to less competition.

The ABI says if a charge cap is introduced, providers should be given a three-year transition period for employers who have already reached their auto-enrolment staging date.

Finally, the ABI says the Government should not cap charges on legacy schemes and instead allow an audit, recommended by the Office of Fair Trading, to be completed by April 2015.

Chase de Vere head of communications Patrick Connolly says: “We have concerns about the consequences of a charge cap. It is incredibly unlikely a retrospective charge cap will be introduced with immediate effect but a three-year transition sounds like a long time.”

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com