Scottish Widows has warned a Government intervention to stop firms charging members for automatic enrolment compliance software would be an “admin disaster” which would drive up charges.
A Pensions Institute report earlier this month urged policymakers to consider preventing providers from including the cost of compliance software in the annual charge levied on members’ pension pots.
The Department for Work and Pensions is considering whether to extend the ban on consultancy charging to include charges for so-called “middleware”.
Scottish Widows head of corporate pensions proposition Pete Glancy says: “On group pensions most of our submissions from employers come in on paper, often late and incorrect.
“If you look at that in the context of auto-enrolment that is going to be an admin disaster and our costs would go through the roof. They would double or triple potentially, which would translate into much higher charges.
“We put an electronic front end in our system, so you can only do auto-enrolment with us if you use our front end. We need the data to come in electronically, so we are forcing employers to give us electronic data to keep charges down for members.”
But Friends Life corporate benefits managing director Colin Williams says: “We welcome the Government review into middleware charges in relation to auto-enrolment schemes.
“We make sure we offer a range of appropriate charges for additional support services. These charges are funded by the employer because we do not consider them to be member costs.”
Last week, Legal & General pensions strategy director Adrian Boulding said tackling middleware charges is “the next logical step” following the ban on consultancy charging for auto-enrolment.
Investment Sense marketing manager Phillip Bray says: “We need full transparency of charges before the Government intervenes in this area.”