The Association of Professional Advisers has joined calls for the Government to rethink a proposal to ban schemes with “built in” commission being used for automatic enrolment.
A DWP consultation setting out plans to cap pension charges, published last month, also asked for views on whether commission should be banned in all auto-enrolment qualifying schemes.
Industry experts have warned the move could cost the advice community £150m and 1,000 jobs, while Scottish Life has urged the Government to abandon plans to implement a charge cap in favour of mandatory five-yearly scheme reviews.
In an interview with Money Marketing last month, pensions minister Steve Webb said he is concerned about potential “unintended consequences” of banning commission for auto-enrolment.
Apfa director general Chris Hannant (pictured) says savers risk losing out if they are forced to switch from a scheme which pays trail commission.
He says: “We are concerned that the DWP is considering making schemes with trail ineligible for auto-enrolment.
“Schemes should not be banned from auto-enrolment eligibility simply because they pay trail, as they may have other valuable features that would be lost if switched.
“The quality of a scheme cannot be based on price alone. Some schemes, particularly older ones, will include features such as guarantees that are no longer available but which may provide better results than lower charged options.
“The levels of service from the provider should also be taken into account. Market innovation will drive competition and provide the best results for consumers.”