Aegon chief executive Adrian Grace is writing to pensions minister Steve Webb outlining concerns about the impact a ban on consultancy charging would have on automatic enrolment.
The letter will focus on two key issues – the importance of helping small businesses with limited resources choose an appropriate pension scheme and the need to engage employers so they encourage their employees not to opt out.
Grace will argue that consultancy charging is central to achieving both of these aims.
Speaking to Money Marketing, Grace says: “We seem to have lost the plot on consultancy charging. The key driver behind whether an employee gets the right pension or not is an engaged employer.
“But you are less likely to have an engaged employer if an adviser is not involved.”
Grace says Aegon will propose a series of good practice requirements to encourage advisers to use consultancy charging responsibly.
These include clearly disclosing charges to both employers and employees, eliminating any charging agreements deemed to be excessive, developing more flexible charging structures so an initial consultancy charge can be spread over a period of up to five years, and urging advisers to ask employers to pay fees for certain overheads.
LEBC divisional director of group savings and investments Glynn Jones says: “The main risk with banning consultancy charging is that small employers will not take advice and their employees will end up in the wrong pension scheme as a result.”
Radcliffe & Newlands chartered financial planner Mel Kenny says: “Employers need to be engaged in auto-enrolment but I do not think consultancy charging is the answer. I prefer to invoice the employer directly so the employee sees the full benefit of contributing.”