Royal London chief executive Phil Loney has called on the Government to address a perceived lack of competition in the corporate pensions market following the removal of consultancy charging for automatic enrolment.
In May, pensions minister Steve Webb confirmed the charging method, whereby fees for advice given to an employer are deducted from members’ pension pots, would not be permitted for auto-enrolment schemes.
Loney says the decision means advisers have less incentive to recommend an employer changes their scheme, even if this is in the interests of members.
Royal London is lobbying for a change to the Pensions Bill which would require the Financial Conduct Authority to put in place an alternative charging regime for group pensions.
Loney says: “The last thing we need is for all this auto-enrolment business to get stuck because if that happens all the benefits will go to the shareholders of big pension companies rather than the members.
“We do not think the corporate pensions market is competitive and we think the biggest hole in that market is the lack of buyer power. The removal of consultancy charging made it much more difficult for intermediaries to operate, particularly at the small employer end of the market.
“As competition develops we need to make sure advisers can still be remunerated for doing the right thing and switching the scheme to one with a lower charge.
“This is something we are lobbying very hard on. We want the FCA to review and put in place a remuneration infrastructure for advisers so they can service this marketplace.”
Corporate Benefits Consulting director Allan Maxwell says: “The problem with commission and consultancy charging was you didn’t know whether advisers were switching schemes in the best interests of members or simply to get paid.
“I think consultancy charging is dead and it is time for the industry to move on.”