Some advisers may have left to late to prepare aspects of their business for the RDR rules. But with so many important issues around tax and charges decided late in the day, or still to be decided, plenty of blame should be apportioned to the disjointed efforts of the regulator and various Government departments.
The concept of consultancy charging, or arranger charging as it was then called, was first tackled by the FSA in June 2009 after the regulator woke up to the fact that advice around group schemes may require its own set of rules. At the time the FSA highlighted the need to ensure the rules would fit in with the Government’s planned auto-enrolment initiative.
Fast forward over three years and after firms have spent plenty of time and money restructuring to fit in with the FSA’s new rules, the Government has now announced an “urgent review” of consultancy charging which could lead to it being banned.
The review is likely to take months to complete, leaving firms in limbo over the way they should be transacting post-RDR business.
Over the summer the FSA was forced to clarify that any consultancy charge should not lead to auto enrolment contributions falling below the statutory minimum. However, pension minister Steve Webb’s letter to the ABI suggests the Government is minded to go much further.
The DWP review could see the introduction of a charge cap for automatic enrolment schemes. Although the Government does not have retrospective powers, the effect of a charge cap on qualifying schemes would have a retrospective impact.
Such a move could lead to providers and advisers having to re-negotiate terms of business around commission that both parties had been assured were set in stone by the regulator.
With the Government looking to “reinvigorate” the pensions market, policymakers need to be very careful new rules do not inadvertently discourage firms from taking advice that would be hugely beneficial to their employees.
With businesses across the country preparing for their upcoming auto-enrolment staging dates it is pretty shambolic that after years of planning those who should be advising them have been left uncertain about how they will be able to charge for their services.