Pension experts have warned advisers could be forced to revisit previously agreed charging arrangements with employers after the Office of Fair Trading raised concerns over auto-enrolment schemes with “built-in” commission payments.
Last week, Money Marketing revealed the OFT was planning to update the market on its study of the defined contribution market, focusing on governance issues and concerns over legacy scheme charges.
The progress update, published last Thursday, also warned members of schemes being used for auto-enrolment which include adviser commission payments could be losing out.
It says: “The OFT has now collected and reviewed evidence on the sector. On the basis of the work it has performed to date, it has some concerns about the way that certain parts of the sector function and the implications that this could be having for savers.
“There are a number of schemes open for auto-enrolment that appear to have built-in adviser commissions and which may not represent the best value for money for those that could be enrolled into them.”
The OFT says it also has concerns over active member discounts, schemes with insufficient scale to deliver value for money for members and difficulties in comparing different providers’ charges.
In November, Money Marketing revealed Government plans to cap pension charges could see advisers forced to renegotiate legacy trail commission agreements.
Syndaxi Chartered Financial Planners managing director Robert Reid says: “This could be curtains for commission on GPPs and it will be a nightmare for a lot of advisers.
“If the Government does decide to remove commission from auto-enrolment, it needs to make sure the saving is passed on to consumers rather than being trousered by the life companies.”
Rowley Turton director Scott Gallacher says: “It would be an administrative nightmare for employers if they had to go back to the drawing board and replace a previously agreed adviser commission with a fee.”