View more on these topics

Kim North: Hard auto-enrol choices that need advice

Kim-North-MM-Peach-700.jpg

The majority of my previous week was spent dealing with pension matters. Therefore I watched with interest the capping of pension charges debate.

My eyebrows raised when I read Money Marketing’s recent news story’s recent news story about how the Government was considering kicking its charge cap reforms into the long grass as they are too complicated.

It has already delayed the date from April 2014 to at least April 2015. Meanwhile, a group of Labour Lords have tabled an amendment to the Pensions Bill that would force the Government to impose a pension scheme charge cap by 30 April 2015.

I would suggest a further consultation to see if the cap charge should be 1 per cent or 0.75 per cent.

I am forgetting about 0.5 per cent as a charge cap as we have so few serious providers in the auto-enrolment space.   

A DWP research paper reports that the average annual management charge is 0.71 per cent for defined contribution trust-based schemes and 0.84 per cent for contract-based schemes. A charge cap on auto-enrolment schemes makes sense to me as most contract-based schemes – remembering that there are only five major life and pension companies as serious provider contenders in the auto-enrolment space – will treat customers fairly as it will create a level playing field.  

Direct customers and financial advisers need to carefully consider the investment strategy as this decision will be more important over the longer term than the cost of the pension.

Will people aged 25 be better off in a Nest plan with its 1.8 per cent contribution charge and 0.3 per cent ongoing charge investing in the default foundation fund which has less than 35 per cent equity content?

Or would they be better served by a pension charging 1 per cent with a default fund with a higher equity content which performs better? 

I may no longer be 25, but I know where I want my pension to be – in well managed equity funds. After the withdrawal of consultancy charging from group pensions, which resulted in a number of pension schemes being rewritten, I trust the policymakers will be sensible about the withdrawal of commissions from group pension business written pre-RDR.

The pension providers are working to capacity, with some providers’ service standards dropping. 

This is partially to do with the increase in the volume of business, with The Pensions Regulator saying the number of trust-based DC schemes has increased in the past year by 14 per cent.

It is also down to the fact that many providers are dealing directly with the customer. 

A chat between a financial adviser and provider may take 10 minutes. With Aunty Georgina, who has a directly written auto-enrolment plan, the same conversation may take 40 minutes to make her understand the issues of, for example, which default fund she should choose.   

There is so much going on in the pensions world, I do worry consumers that do not have a financial adviser will never understand the issues.

Kim North (kim@techandtech.co.uk) is managing director of Technology and Technical

Recommended

Coin-Stack-Money-Currency-700.jpg

Independent report questions Govt ‘defined ambition’ pension reforms

The Government’s “defined ambition” pension reform plans have been called into question in an independent report on the UK retirement market. Last month, reports suggested that measures to support collective defined-contribution schemes – whereby members’ contributions are pooled and the pension is paid from the collective fund – would form the centrepiece of the Pensions […]

2

Keith Richards: Delivering change in the annuities market

Forget the roses, chocolates and champagne. One of the most anticipated deliveries on Valentine’s Day – in the financial services sector, at least – was the publication of the FCA’s long-awaited thematic review of annuities. Key among its findings was that 60 per cent of those reaching pensionable age do not switch providers when they […]

Champagne-Celebration-Celebrate-700x450.jpg
3

Champagne and iPads for loans: Packager defends new broker sales incentives

A secured loans packager has defended its new sales incentive scheme offering mortgage brokers bottles of champagne and iPads for business it receives from them.  The Lending Wizard, a sourcing tool ran by packager Freedom Finance, is offering brokers an iPad Mini, Kindle Fire or iPhone 5 for every secured loan they complete. Secured loans […]

Abe and Modi

Investment ideas to power returns

We believe the most exciting stockmarket opportunities today are in those places where a new generation of leaders are successfully transforming economies and companies in favour of investors. In a new investment guide and website, which is suitable for use with your clients, we set out our views on these reformers. Click here to find […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There is one comment at the moment, we would love to hear your opinion too.

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