The Government is set to launch an “urgent review” of consultancy charging due to concerns about the impact advice fees will have on workers’ pension pots.
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.
In the letter, seen by Money Marketing, Webb says the Government will make a decision on whether or not to ban consultancy charging for automatic enrolment once officials have reviewed the evidence.
He says: “I am increasingly concerned about the way consultancy charges might interact with automatic enrolment. They should only be deducted from an individual’s pot where there is a tangible benefit to that individual.
“I have received strong representations on this issue, including a number of calls for an outright ban on consultancy charging in qualifying schemes, and the Financial Services Authority has expressed concerns about whether consultancy charging in automatic enrolment schemes will be consistent with its rules.
“It is vital we establish appropriate measures to ensure individuals who pay consultancy charges benefit from the advice given, and we need clear evidence to decide how such measures should work.
“My officials are ready to carry out an urgent review of policy and practice in this area. However, they need access to detailed information about the way business involving consultancy charges is being structured by those among your membership that offer group personal pensions.
“Once I am in possession of the facts, I shall be able to decide whether or not to permit consultancy charges to be levied on automatic enrolment schemes.”
The FSA has already said it will not allow a consultancy charge to reduce the value of a member’s pension contribution below the auto-enrolment minimum of 8 per cent.
Last week, providers and advisers warned the regulator’s stance risks creating a damaging advice gap for small and medium sized businesses.
Addressing the Corporate Adviser DC Summit last month, TUC head of campaigns and communications Nigel Stanley said workers should not be expected to pay for advice provided to their employer.