The Government has dealt a huge blow to advisers by announcing plans to ban pension schemes with in-built commission being used for automatic enrolment.
Pensions minister Steve Webb confirmed the ban would be introduced for all pension schemes from April 2016.
Consultancy charging will also be prohibited for all auto-enrolment schemes form April 2015 – including those where a legally enforceable agreement was in place before 10 May, when the Government announced a ban on the charging method for new schemes.
In addition, the Government is capping charges on auto-enrolment default funds at 0.75 per cent from April 2015 and banning active member discounts from April 2016.
In a statement in the House of Commons today Webb said: “As well as meeting the 0.75 per cent cap, from April 2016 schemes will be prohibited from taking money from people’s pension schemes to pay for sales commission.”
Experts say the commission ban, which was first floated in October as part of proposals to cap pension charges, could cost advisers £150m and 1,000 jobs.