Advisers have attacked the Government and the FSA’s “shambolic” handling of consultancy charging after pensions minister Steve Webb paved the way for an “urgent review” of automatic enrolment advice fees.
Under RDR rules, advisers who advise employers will be able to levy a consultancy charge for the work they carry out. This will be deducted from the pension pots of employees who join the company pension scheme.
Pensions minister Steve Webb (pictured) has written to Association of British Insurers director general Otto Thoreson requesting evidence about the way business involving consultancy charges is being structured for group personal pensions.
The FSA has already said it will not allow a consultancy charge to reduce the value of a member’s pension contribution below the auto-enrolment minimum of 8 per cent.
Syndaxi Chartered Financial Planners managing director Robert Reid says: “You could see this coming from a mile away, it is absolutely shambolic.
“We have DWP saying you cannot erode contributions through consultancy charging, the FSA saying it has to be a better deal than the auto-enrolment minimum and a bunch of SMEs who won’t pay an upfront fee.
“It beggars belief that we are five weeks away from the RDR and advisers still have no idea whether they can levy a consultancy charge for setting up a group scheme.”
Master Adviser senior partner Roy McLoughlin says: “It is absolutely ridiculous that the DWP has made this intervention at the 11th hour.
“Businesses are asking questions about auto-enrolment and for there to be so much confusion about a crucial area is not good news.
“Employers need clarity about how they can pay for advice as a matter of urgency.”
Aegon head of regulatory strategy Steven Cameron says policymakers should distinguish between employers paying the auto-enrolment minimum and those voluntarily paying above the minimum.
He says: “We need to be very careful that we differentiate between situations where a consultancy charge reduces contributions below the statutory minimum and other situations where an employer might be paying far more in and wants to cover the cost of their advice out of part of that excess.
“That is an important distinction we need to draw because these two situations are very different. It would be bizarre if DWP, FSA or anyone else say to an employer who has voluntarily agreed to pay above the auto-enrolment minimum that they were not allowed to agree with an adviser to take payment out of those excess contributions to cover the cost of advice to the employer.
“I am very concerned that the phrase ‘auto-enrolment scheme’ is being misused because not everyone will be paying the minimum.”