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‘Let down’ advisers warn charging chaos will hit auto-enrolment

Steve Webb 480 LibDems DWP

Thomsons Online Benefits chief executive Michael Whitfield has attacked the Government’s decision to launch an 11th hour review of consultancy charging and warned an automatic enrolment ban would force corporate advisers to adopt two-tier charging structures.

Last week, pensions minister Steve Webb (pictured) wrote to Association of British Insurers director general Otto Thoreson requesting evidence on the charging method and warning it could be banned for auto-enrolment.

Whitfield says: “I am livid the pensions minister has made this intervention with weeks to go until the RDR deadline.

“We have our plan in place and the majority of our clients will pay fees but it is an absolute disgrace that the industry has been let down by the FSA and the Government at this stage.

“The Government’s auto-enrolment TV campaign is not enough and will not foster member engagement. Member engagement has to be month in, month out and carried out by the employer or their adviser.

“Without relentless education, employees will expect their employer to provide for their retirement and the bottom line is that will not be the case.”

Whitfield says if the Government bans consultancy charging for auto-enrolment, corporate advisers could move to a two-tier charging model.

He says: “We can agree a consultancy charge with a client on 1 January but we have to include a caveat which says if the Government decides this is not allowed they will have to pay a fee.

“I have clients who want to do a consultancy charge next year. If the Government does introduce a ban for auto-enrolment schemes and a client wants to pay a consultancy charge, we would allow this up until their staging date.

“Once they hit that date, we would move to an advice fee per person model.”

Richard Jacobs Pension and Trustee Services managing director Richard Jacobs says: “We have agreed several contracts on a consultancy charging basis already which we will need to revisit.

“We have also spent a lot of time and money organising seminars and putting marketing material together for small employers ahead of their auto-enrolment staging date.

“But these people will not pay a fee, so if the Government say we cannt do consultancy charging then we will have to walk away. If small employers cannot access advice then auto-enrolment will fail.”

Consultancy charging: How we got to where we are

  • June 2009: FSA consultation paper highlights the need to create a separate charging regime for group business under the RDR. At the time this was referred to as “arranger-charging”. Regulator highlighted the need for rules to fit in with the Government’s auto-enrolment plans.
  • December 2009: A further FSA consultation paper develops the idea of consultancy charging, highlighting the need for charges to be spread fairly across members. Paper also confirms the HMRC would regard “reasonable” consultancy charges as “scheme administration member payments” and not as an unauthorised payment attracting a tax charge.
  • March 2011: FSA publishes its final rules for consultancy charging. A working group published good practice guide to consultancy charging including the fact charges should be clear, fair and reasonable.
  • March 2012: FSA RDR policy statement included information about how providers should facilitate consultancy charging in corporate pensions.
  • June 2012: FSA newsletter highlights that a consultancy charge should not take contribution levels below the auto-enrolment minimum. Also reminded firms they “must have regard to the best interests of both the employer and their employees when setting their charges.”
  • November 2012: Pensions minister Steve Webb writes to the ABI to announce plans of an “urgent review” into consultancy charging which could lead to it being banned for auto-enrolment.


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. Usual FSA rubbish. If you do it wrong they will stamp on you, but them – well that’s a different story!

  2. I would like to know what they are thinking of. The whole ethos of the ill thoughtout RDR along with every bit of FSA material has been trying to get the message across that advice is not and has never been free and will not be free. This means it has to be paid for. By who if AC is banned? Employers will not (or in the most part for smaller employers – cannot afford to) pay fees. Noone will give advice if they are not getting paid for it and so the entire thing will flop on its face. Or maybe there is a hidden agenda. The less GPP’s etc that are done mean more take up of the hughly expensive NEST MUST be taken up. The Minister can then say publicly how successful NEST has been in years to come in terms of the number of members. Only the industry will know the truth behind this real reason – coz we were forced out of the market. I really hope this comes back to bite this moron, Webb, in the *ass – big time. Problem is that by then he will have moved on and his predecessor will say, It was done done by a previous minister so wasn’t my fault Gov’ner. It stinks to high heaven

  3. So what is the 1.8% Nest contribution charge? Taken until the initial costs have been repaid – indicated at 40 years plus?

  4. You cannot trust this man to do anything in an honest way. He has said that the state pension is a mess and it would take Einstein to understand it and yet he does not try to fix it but dreams up other schemes that just make the whole pensions situation even more complex than it already is. This is the man who was going to right this totally unjustified and immoral freezing of just a minority 4% of state pensioners who get no increases ever unlike the other 96% who do. Oh yes, that was when he was in opposition and now he makes up excuses and has even told lies about why it cannot be changed when it is purely a British government policy which cannot be justified in any sense of the word. Parliament can change this discrimination tomorrow given the will of the politicians (no don’t laugh) but don’t hold your breath either.
    So why believe anything he says ?

  5. So, in addition to:-

    1. forcing employers to set up and pay into a scheme that most don’t want,

    2. of which most employees are highly suspicious and

    3. which will constitute participation in a completely messed up pensions framework,

    our puppet of a pensions minister is now proposing that the costs of advice will have to be paid for on top.

    Meanwhile, nothing is being said or done about the annuity rates trap at retirement, the punitive tax levied against unspent funds on death after retirement or the broken pre-election manifesto promise from the Conservative party that they would undo all the damage done by 25 years of government meddling with the pensions framework.

    A HNW client said to me the other day “How can the government expect anyone to have any confidence in pensions when they keep buggering about with the rules?”

    The following day, a LNW client said that had he known what lay ahead (at retirement), he’d never have put any money into a pension plan.

    Yet the government remains resolutely oblivious to all such sentiments, believing blindly that auto-enrolment will be the solution to everything. It won’t.

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