Pensions minister Steve Webb says the Government should have acted to ban consultancy charging two years ago and admitted it was late to clampdown on charges ahead of auto-enrolment.
Speaking at a Standard Life fringe event on pensions at the Liberal Democrat conference in Glasgow today, Webb said he was “gobsmacked” at the lack of a quality standard on schemes that were set for auto-enrolment when he came to office in 2010.
Last week, the Government banned consultancy charging and said it was considering a retrospective ban on existing schemes.
Responding to a question from Money Marketing on whether he was planning any further retrospective action, Webb said he will consult on a charges cap in the autumn.
He said: “We don’t want someone auto-enrolled into a scheme where a huge slug of money goes on charges. We are still consulting on exactly how we deliver it and will consult on a cap on charges in the autumn. It would mean you can choose an auto-enrolment scheme but can only charge such a per cent. We need to move fast on it.
“The OFT has a study on workplace pensions out this week and once they publish we will consult on those things. For most of the providers you go to it won’t be an issue as we are trying to deal with the extremes. Should we have done this two years ago? Yes, I was gobsmacked when I took office in 2010 to discover there were almost no quality standards on auto-enrolment schemes.”
Webb said consultancy charging is not in the “spirit of auto-enrolment” and he wants more transparent charging for advice.
He said: “Taking money out of people’s pots didn’t seem right to us. We wanted to make consultancy charging transparent so firms can absolutely pay for advice if they have the money and want to do so but it is a direct transaction between employer and consultant.
”We think it will improve the reputation of the sector. Some providers weren’t doing it at all, others stopped as soon as we started looking at it and a few kicked and screamed until we stopped them.”