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Govt eyes three-year ‘sunset clause’ for pre-RDR group trail ban

The Government is considering a three-year “sunset clause” as part of proposals to ban pre-RDR commission linked to automatic enrolment schemes, Money Marketing understands.

In September, the Office of Fair Trading asked the DWP to consult on banning pension schemes being used for auto-enrolment that contain “built-in” adviser commission or that penalise members with higher charges when they stop contributing into their pensions.

Pensions minister Steve Webb has said this would be considered as part of a consultation on a charge cap.

Implementation of a charge cap has been delayed until at least April 2015.

Aviva estimates a ban could cost advisers £150m commission and put 1,000 adviser firms out of business.

Money Marketing understands the Department for Work and Pensions has now softened its stance on the proposed ban in light of concerns about the effect an immediate ban would have on auto-enrolment.

As a result, it is considering giving firms three years from their staging dates to remove commission. If the rules came into force next April, they would apply immediately for new schemes but existing schemes would have three years from their staging date to change.

Legal & General pensions strategy director Adrian Boulding  says: “The DWP is right to take into account that these are real people who have put their own blood, sweat and tears into  building a business on what they thought was an acceptable business model. That has to be respected in the timeframe for any ban.”

Aviva head of corporate benefits policy John Lawson says: “This would be good for advisers as it gives them three years to plan for removal. It also gives providers time to plan as we would have to make IT changes, which is not straightforward and could take 18 months.”

Wingate Benefit Solutions corporate adviser Richard Grover says: “A ban would definitely create a wobble in the industry but some firms are more exposed than others. The more time we have to plan the better.”

The DWP says it will be publishing its consultation response in due course.

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. I wish gummint would put a charge cap on a multitude of other things including bank charges, lending fees, car dealer profits, house builder profits and of course regulatory ‘fees’.

  2. I will soon be able to register my business as a charity at this rate.

  3. Whilst I don’t disagree that pension scheme memebrs should not be paying for advice provided to their employer, it’s a shame that TPR, FCA, Government etc etc didn’t think about this in the many years BEFORE automatic enrolment commenced.

    I’m approximating here but wasn’t AE first muted in 2005 or so….?

    They need to realise that with change brings cost and the need for advice – something they are trying to remove from the process!

  4. Why do advisers keep getting excited about this – if the service they are providing is worth paying for then the employer or employees will be happy to continue to pay for it – if they don’t think the service is worth paying for they won’t pay. Much more transparent. Steve Webb is helping us create a proper profession that is totally transparent.

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