The Government is considering capping charges for automatic enrolment pension schemes in a move which could force advisers to renegotiate previous trail commission terms with providers.
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 and threatening to ban the charging method.
Policymakers are understood to be weighing up whether an absolute cap on charges for qualifying auto-enrolment schemes should be introduced to ensure savers receive value for money pensions.
A Government source says: “We do not have retrospective powers but we can cap charges in qualifying schemes. If we were to implement a cap, any scheme which had a charge which exceeded that cap would become non-qualifying from when the law came in.
“The employer has a duty of continuity of scheme membership of a qualifying scheme, so that scheme would need to be changed or the individual would need to be enrolled into a scheme that was qualifying. So it is not retrospective as such but it could have a retrospective impact.”
Hargreaves Lansdown head of pensions research Tom McPhail says: “For as long as you have legacy schemes with commission charges hard-wired into them, you have a potential flaw at the heart of auto-enrolment, so you can see why a charge cap would be attractive to the DWP.
“I do not think Steve Webb is particularly worried about intermediaries who are going to have their contracts rewritten by life companies.
“His belief is that, particularly for small schemes, there should not be an intermediary involved for auto-enrolment.”