Pensions minister Steve Webb has attacked Scottish Life’s decision to continue to offer consultancy charging for pre-auto-enrolment business and called on the provider to think again about the move.
Speaking at a Scottish Widows event in London today, Webb said: “We announced the ban on consultancy charging and a provider says ‘stuff you, until it’s absolutely illegal not only will I carry on with pipeline business, I will write new business as well’.”
Speaking to Money Marketing after the event, Webb said: “Any provider thinking they should carry on business as usual [with consultancy charging] should think again.”
Last month, the Government announced plans to ban consultancy charging in all auto-enrolment pension schemes. Last week, Scottish Life said it will continue to offer consultancy charging, where fees for employer advice are deducted from employees’ pension pots, ahead of firms’ auto-enrolment staging dates for pipeline schemes and new business. Scottish Life has set up just over 100 schemes on a consultancy charging basis.
Aviva, Friends Life, Scottish Widows and Standard Life will not be offering consultancy charging to firms who are yet to start auto-enrolling staff into workplace pensions.
Aviva head of policy, corporate benefits John Lawson says the DWP is planning to extend the consultancy charging ban to all qualifying schemes which meet auto-enrolment conditions but are yet to begin enrolling staff. He says the DWP will look to secure this power under the new Pensions Bill currently going through Parliament.
He says: “Our view is there is no point in us continuing in a consultancy charging world, whether that is for qualifying schemes or not.”
Friends Life technical reform manager Dale Critchley says: “We agree with the DWP that employees should not pay for things they do not directly benefit from.”
Aegon regulatory strategy director Steven Cameron says: “Pending clarification from the DWP, we may still accept new schemes on a consultancy charging basis but we see this as an exception rather than the rule.”
Scottish Widows chief executive Toby Strauss says: “Given the DWP decision to ban consultancy charging for schemes used for auto-enrolment, we have decided in the interests of clarity that the industry needs to move on.
“We are therefore being clear with all advisers that we will not accept any schemes going forward that use consultancy charging.”
In response to Webb’s comments, a Scottish Life spokesman highlighted comments the provider included as part of a press release last week announcing its decision to continue offering the charging method on pre-AE business.
It said: ”Scottish Life will monitor the use of CC to help ensure that good member outcomes can be delivered. We are keeping in contact with DWP to help ensure that the approach taken is fully compliant with the planned legislation and will deliver good member outcomes.”
Page Russell director Tim Page says: “I completely understand why providers have said no to making back office fudges that will only be temporary anyway.”
Rowley Turton director Scott Gallacher says: “It’s fair comment from Webb because to have a consultancy charging loophole is not great and it is against the spirit of the DWP’s intentions.
“Scottish Life is not helping the industry and it doesn’t put advisers in a good light.”