Pension providers say advisers are unlikely to need to renegotiate existing consultancy charging terms with employers even if the Government carries out its threat to ban the practice for automatic enrolment.
Consultancy charging is the regime designed by the FSA to allow advisers to deduct a charge from employees’ pension pots for advice given to their employer.
In June last year, the regulator said a consultancy charge is not permitted to reduce the value of contributions below the automatic enrolment minimum.
In November, pensions minister Steve Webb wrote to the Association of British Insurers demanding evidence of how consultancy charging agreements are being structured.
The Department for Work and Pensions is threatening to ban the charging method unless the industry can prove scheme members receive a “tangible benefit” from the advice given.
Aviva corporate benefits head of policy John Lawson says: “If an adviser has agreed a contract with an employer and the scheme members saying this charge will be deducted, I cannot see how you unwind that.
“The Government does not normally try to apply legislation retrospectively and I do not think it will go down the route of attacking a contractual agreement.”
Aegon regulatory strategy director Steven Cameron says: “Provided the consultancy charge does not reduce the value of contributions below the auto-enrolment minimum I very much hope contracts already agreed between advisers and employers will not need to be renegotiated.”
However, Foot Anstey head of financial services Alan Hughes says: “This depends entirely on how the Government decides to change the rules, if it decides to change them.
“Ultimately, if the Government say you have to unwind consultancy charging arrangements already in place then that is what will happen.”
The DWP declined to comment. It is expected to make a final decision on the future of consultancy charging for auto-enrolment in March or April this year.