View more on these topics

DWP report scrutinises auto-enrol commission charges

Savers in pension schemes set up on a commission basis pre-RDR are on average charged an extra 0.2 per cent a year, DWP research reveals.

An independent study of defined contribution pension charges commissioned by the DWP shows that, on average, members of schemes with in-built commission pay an additional 0.2 per cent in annual management charges compared to members in schemes without commission.

The DWP is currently considering the impact a ban on in-built adviser commissions would have on auto-enrolment.

Scheme size was also found to be an important factor affecting the average AMC paid by members. Across both trust and contract-based schemes charges tend to be lower in large schemes when compared with smaller schemes.

The level of contributions, which providers use to help determine the amount they charge, and the age of the scheme are also cited as key determinants of the AMC.

Overall, the average charge in all contract-based schemes was 0.84 per cent, compared with 0.75 per cent in trust-based schemes.

According to the report, providers argued that higher charges gave them freedom to offer a better service to customers.

It says: “Providers felt that higher charges sometimes allowed them to offer a range of higher quality services, which could help drive member engagement.

“A few providers described anecdotally how charging a bit more allowed them to devote more resources to nurturing employer
and member relationships, for example, by spending more money on producing high-quality communications.”

Advisers also suggested choosing a pension scheme was about more than just price.

The report says: “Some advisers shared providers’ views that there was more to picking an appropriate scheme than simply identifying the one with the lowest charges.

“While they always took charges into consideration when researching the market, they looked primarily at how different charges would deliver value for money.

“Advisers did not agree on a specific list of services for which it was worth paying more, but explained in broad terms that they would recommend a higher-priced scheme if they felt that it was better suited to the employer’s and members’ individual objectives.”

Recommended

Savings-Money-Currency-Business-Finance-700.jpg

MetLife hikes unit-linked income deferral rate following adviser demand

MetLife has hiked the income deferral rate on its unit-linked guarantee product from 3.5 per cent to 4.25 per cent in response to demand from advisers. The change means clients will receive an extra 0.75 per cent in guaranteed minimum income for every year they defer taking income from the product. The provider has also […]

Justice-Fine-Ban-Court-Gavel-Judge-700x450.jpg

SFO charges three ex-Barclays bankers over Libor rigging

The Serious Fraud Office has charged three former Barclays bankers over Libor rigging. Peter Charles Johnson, Jonathan James Mathew and Stylianos Contogoulas will appear at Westminster Magistrates Court on a date to be notified. It is alleged they conspired to defraud Libor setting between 1 June 2005 and 31 August 2007. The SFO accepted the Libor […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. An extra 0.2% AMC funds commission and employers then pay smaller/ zero fees. The firm stays in business and receives IFA support. Members pension pots may be slightly bigger at the other end, but the firm is still in business and still employs all staff. Alternatively smaller firms can pay a fee of what £1500 or more. Then auto enrolment advice becomes just another tax – like the contributions – and from a party theoretically supportive of smaller business and committed to lower tax this would be rank hypocrisy…

  2. On a day when the Prime Minister is trying to get insurers to dance to his music regarding floods, the DWP are still throwing stones. Anyone would think that the DWP have been politicised and are sore that Cameron has called a halt to the price cap

  3. @Simon – exactamundo

  4. Why not ban commission on all schemes it makes totally transparent. Who would be against that? Advisers and I am one need to realise that they should only be paid for agreed services, not be paid for services the client doesn’t want or want to pay for. We are in a new world which is the right world for all. I think Steve Webb is on the money so far and seems to get it.

  5. looking for a little info? like your setup and how your to the point starting my site up
    ctginternationalinc.com check it out and get back to me! I’m always looking for new ideia and friends to collaborate with for better results!!

Leave a comment

Close

Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm

Email: customerservices@moneymarketing.com