View more on these topics

Govt targets auto-enrol ‘middleware’ in new charges clampdown

The Government could force pension providers to levy a separate fee for automatic enrolment compliance software after an independent report raised concerns about the way firms are charging for “middleware”.

A report from the Pensions Institute last week urged policymakers to consider preventing providers from including the cost of compliance software in the annual charge levied on members’ pension pots.

The report says: “We suggest policymakers, regulators and those responsible for scheme governance should consider very carefully whether it is fair for scheme members to pay the costs of employer compliance, and whether it is fair they should pay for the services providers give free of charge to advisers in order to help them sell their schemes.”

Legal & General pensions strategy director Adrian Boulding says: “L&G charges employers extra for compliance software and we have taken a lot of stick in the press for doing that.

“Tackling this is the next logical step. If the provider is doing something for the employer rather than the employee then the employer should be charged a fee for that.”

Rowley Turton director Scott Gallacher says: “This would pull the rug from underneath a lot of employers. Provided the costs are in respect of running the pension scheme then I don’t really see this as a problem requiring Government intervention.”

A DWP spokeswoman says: “We have already taken action to ban consultancy charges in auto-enrolment schemes. In our recent consultation on charging we sought views on how these regulations are working in practice and what the impact would be of extending them.

“We are continuing to examine the responses to that consultation and will bring forward further proposals in due course.”


News and expert analysis straight to your inbox

Sign up


There are 8 comments at the moment, we would love to hear your opinion too.

  1. All comments made by L & G and Adrian Boulding in relation to lower charges and “Unfair charging” should be taken with a massive silo of salt. Until they a) stop reducing customer services to catastrophically poor levels to fund their lower charges and b) offer terms to all employers regardless of turnover and contribution levels then it is hard to see what gives them the right to make sanctimonious comments implicitly criticising the rest of the industry. L & G clearly have the ear of the DWP, and it makes one wonder quite why they have such a position of influence. Steve Webb, if you pay peanuts you get monkeys. Wake up!!

  2. Ignoring the two (perhaps more!) sides of the debate, the main issue is that there are companies who have now staged and will have just got their shiny new pension scheme in place along with plenty more actively seeking advice and this curve ball has just been thrown at them….

  3. Good point @Paul Stocks. But to be fair to DWP, they have clearly recognised this problem with employers who have recently changed their schemes, and this is almost certainly the reason for delaying a cap. However, L & G are helping to mislead the DWP into thinking that future returns are all about the charges. A better option may be to insist that all schemes used for auto enrolment must offer a default fund which meets a sensible charge cap (higher than 0.5%) but that they also contain funds with higher charges which the member can CHOOSE to invest in if they perceive the higher charges are justified. This was sort of happening anyway, without the need for legislation.

  4. We haven’t even hit the deadlines for small businesses yet and the government are still making up the rules as they go along! What is going to happen when ‘Joe’s Fish and Chip Shop’ has to set up a scheme for his 3 staff and is faced with bill after bill for setting up these schemes!!

    And as for providers giving this service free to advisers – again that isn’t going to happen to Joe because no one is going to (or be able to!) offer him the assistance or service he needs because advisers cant charge him or he wont pay! So who are these providers giving these services to for free?

    AE is going to be the biggest disaster this country has seen for a very long time. If you think PPI was bad, you aint seen nothing yet! The only difference will be that the government will be able to do the same as they did with contracting out and blame on it someone else! Steve Webb or any of the other numpties certainly wont be in the same job so they can sleep easy and not have to worry about their pension being in an AE scheme with NEST.

    Here comes the cliche – If the government thinks that NEST is so fantastic why dont they make EVERY MP pay into that and stop the current pension arrangements they have? We are in this together aren’t we?

  5. “What is going to happen when ‘Joe’s Fish and Chip Shop’ has to set up a scheme for his 3 staff and is faced with bill after bill for setting up these schemes!!”

    Possibly that Joe’s fish and chip shop will reduce their opening hours and be three employees less perhaps……

  6. I think you have been remarkably retrained. You actually used L&G and Service in the same sentence. What service?
    As for their self-serving sanctimonious utterances, you may recall how gung-ho they were about Stakeholder. I find it more than odd then when asking for a Stakeholder quote I was harangued to offer something else from their pension bag of tricks. Some would call it hypocrisy and I certainly wouldn’t argue.
    The biggest problem with AE is – Life Offices – a plague on all their houses.

  7. …Sits and watches developments with disinterest!!

  8. And Steve Webb said most employers should be able to comply with auto-enrolment without paying for advice. Mind you that was before the latest zig-zag in policy relaxations and charge caps.

    This is really the pension industry’s version of building aeroplanes in the sky. We’ve limped up into the air and we are desperately trying to bolt on the rest of the stuff that will keep us there.

Leave a comment


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