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Steve Webb attacks Scottish Life’s consultancy charging move

Steve Webb: Any provider thinking they should carry on as business as usual should think again

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.”


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Scottish Life U-turns on consultancy charging

Scottish Life has U-turned on its decision to continue to process new business on a consultancy charging basis. Last month, the Government announced plans to ban consultancy charging for all auto-enrolment pension schemes. Last week, Scottish Life said it will continue to offer consultancy charging, where fees for advice are deducted from employees’ pension pots, […]


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There are 34 comments at the moment, we would love to hear your opinion too.

  1. It is hard to believe that this twit has the audacity to condemn Scottish Life when it’s his fault that they spent millions of pounds in developing systems to cope with consultancy charging which have to be scrapped.

    How about apologising for incompetence, indecision and ineptitude before criticising a commercial organisation for following the current rules because the idiot responsible for them can’t think more than two minutes ahead….

  2. Instead of just banning something maybe Steve Webb would like to give clear guidance on how advisers CAN charge instead of the misguided suggestion that advisers should work for nothing.

    After all not every employer in the country is going to be prepared to read through 250 pages of guidance notes from the pension regulator to set up auto enrolment. These same employers may also not have very deep pockets, particularly taking into consideration they are now liable for 5% pension contributions.

    Maybe Money Marketing would invite Steve Webb to sensibly come up with suggestions on how advisers are going to be remunerated for their services as the pension minister, I would have thought he would at least have some understanding of the industry he is regulating and would have some ideas of how it’s meant to work.

  3. Completely agree with anon 2.21pm

    He has missed the point again. He banned CC for schemes being used for AE – fine but anyone joining prior to the company staging date will be doing so contractually. If the employee doesn’t want to join the scheme then they don’t have to

  4. And the Tories still wonder why once loyal supporters are leaving by the thousands for ukip.

  5. So Steve (I make up policy as I go along based on a Which report) Webb thinks that Scot Life have said ‘stuff you’ – all they are doing is the same as Google (call me Daves mates); Starbucks et al who are sticking to the law – as Steve said until it is made illegal – so get on with it and make it illegal, until then don’t keep throwing a tantrum like a spoilt child. If the Govt muted a point that they were going to raise the speed limit on motorways to 100 mph should we all decide to do that prior to becoming law they would fine everyone caught and say the law states 70mph. so although you may not agree with Scot Life, they are not breaking any laws even though some might say it is morally wrong. You are the Govt Steve – change it – you have only had 3 years plus to think about it and the consequences!

  6. Clueless politicians jstu dont get it 4th June 2013 at 2:32 pm

    These people make me so angry, they are so incompetent.
    IF an employer will start paying into a pension plan BEFORE the staging date (say in 2 years time) on the basis that the advice fees for doing it can come out of the employer contributions, then isnt it better for employees to get eg 90% of the employer contributions for 2 years as opposed to getting nothing for those same 2 years? After the staging date it will be exactly the same either way. If an employer in difficult financial times has to pay something on top of contributions, then the chances are they are more likely to wait as long as possible before starting contributions.
    When its compulsory to pay in, then fair enough, but until then surely allow some motivational factors to play out so that employees get pensions funded sooner.
    Theres no logic in what Webb is saying at all.

  7. Maybe MM would like to ask Steve Web for an answer to my letter as I am still waiting!

    Mr Steve Webb
    The Pensions Regulator
    Napier House
    Trafalgar Place
    Brighton BN1 4DW

    Dear Mr Webb

    The reasons for writing to you is that it has been reported in the press you are considering banning consultant charges and also capping fees on all occupational pension schemes. I work as an Independent Financial Adviser and it is increasingly becoming difficult for advisers to make a profit in a highly regulated industry.

    So, instead of coming up with broad statements that you are going to ban consultancy charging maybe you’d like to come up with suggestions of how advisers are meant to charge for pension advice.

    After all, we are businesses and have to make a profit!

    Are you really suggesting that all of the costs of setting up an occupational pension scheme for a small company should be borne solely by the employer through direct charges?

    If that is the case then please spell this out, as I am sure that the many small businesses in the UK will be extremely happy with you (not).

    After all this is a compulsory scheme that everybody is going to have to set up and make sure that their employees comply with extremely complicated pension legislation and allowances.

    The fines for not complying with this legislation are scary for employers. E.g., £400 statutory notice and then depending on the number of staff you could receive a fine per day for not complying with the regulations.

    1-4 staff 50 per day
    5-49 500
    50-249 2,500
    250-499 5,000
    500 or more 10,000

    So businesses will not be able to stick their heads in the sand they will have to address this piece of work based legislation.

    This is all very well and fine but this is a considerable amount cost add onto a business particularly as start-ups will become liable for this scheme from 2016 even if you employ one member of staff.

    So instead of coming up with some grandiose statement of banning consultants charging maybe you’d like to come up with suggestions of how advisers can charge and make a profit. Surely, you have a responsibility to make sure that businesses comply with the law and so will need to take advice or are you expecting to turn every small business owner into a pension expert.

    It seems that regulators like yourselves seem to think that advisers should work for FREE, whilst paying high regulator fees to keep you in your highly paid job!

    Since the introduction of RDR we have seen a considerable drop in the number of advisers giving advice in the area of pensions and investment. Instead of continually releasing statements stating that you are going to ban this and cap that maybe you should consider the impact on the adviser profession as we are already seeing a considerable negative effect on adviser numbers due to RDR. Government legislation is already condemning millions of individuals in the UK to no advice and some are now turning to illegal advice givers with drastic consequences to many millions of people’s savings and investments including pensions.

    It is in my view the responsibility of any good regulator to inspire people to save and to make sure that individuals make the right choices and this often means that companies and individuals will need advice. Both the PRA and the FCA seem to think that advice is a dirty word when in fact – good quality financial advice is a life changing experience for many.

    If you need any additional information from an adviser prospective please do not hesitate to contact me. As usual I won’t hold my breath as small advisers like myself seem to be ignored, even though we are the lifeblood of financial advice in the UK. It always seems to me that regulators and politicians like you seem to only want to listen to large conglomerates. I wonder why that is?

    Peter Herd
    Independent Financial Adviser

  8. Could this be the first time ever all the comments on here will be in full agreement?!! It is an absolute nonsense that providers have all spent 4 years and millions of pounds on hideously complicated system builds, literature changes, process development…all to be binned in 4 months.

    Utterly astonishing that the industry has to roll over once again at the whim of fools. Meanwhile, poor advisers are holding their hands up asking how to get paid and no-one, especially the providers has the answers.

    Its only a joke if something is funny…and this is far from funny.

  9. Pádraig Floyd 4th June 2013 at 2:47 pm

    This was going to happen, because the DWP announcement made it clear CC was to be banned from AE business. My immediate question was: what about the rest?
    If this is another example of a government department not actually saying what they meant, that’s hard cheese. Businesses will use loopholes until they are closed.
    And this wasn’t even a loophole, but an exception. Glaring, perhaps, but maybe Steve needs to make sure his press team know exactly what the policy wonks are thinking, if that, indeed, is what they do.

  10. 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.”

    So what about the charges on NEST to pay for the set up costs then?

    Is all this noise and bluster a deliberate ploy to divert people from picking up on the initial charges on NEST which are being used by TATA to repay the state subsidies to set everything up?

  11. Can anyone do an illustration of a GPP with CC charge of say 40% of first years premium based a salary of £20000pa assuming 8% contribution and compare that to a NEST illustration? It would be interesting to see how fund value compares for a default fund after 15 & 20 years on a similar basis. I that you may find the GPP will be extremely competitive, even with the CC. That aside as others have said – Good on Scottish LIfe for acting within the law. 2 years extra contributions plus growth over that time is a whole lot better than nothing until the staging date hits. This man is a total baffoon, like so many other politicians who become junior ministers. Their whole purpose it progress their career and will do anythig to get so called good PR. The pensions indusrty needs to stand up firm to this and explain in terms, so simple that even politician unerstand it how easy the charging structures are on a pension. If we can do this for our clients on a day to day basis then even politicians should be abe to grasp this.

  12. Next will be legacy terms and trail the OFT report will push that along.

    CC was always anti TCF so why are so many shocked at the early death of CC.
    Scot Life needED CC more than most

  13. Buffoons r us 4th June 2013 at 4:21 pm

    Presumably we can now welcome the expected news that any “distribution” costs included in the price of a Company Car will now be met separately by the Employer, thus reducing the retail price and hence the tax bill on the employee. After all, as the man from Friends said, why should the employee be contributing anything towards those parts of the car he doesnt use, such as the purchase process itself?

  14. Nero fiddled while Rome burned.

    Advisers – sit back and fiddle while this hair brained scheme that no small businessman/woman wants or can afford, burns.

    Await the U-turn and then start again on the next Governments alternative hair brained scheme.

  15. I am genuinely amazed. When people like Peter Herd ask whether the employer should pay the fee I begin to feel that I really am on a different planet.

    Of course the employer should pay. With AE now on the doorstep they HAVE to install a pension and if Adviser Charging (or another way of putting it – ripping off the member benefits) is banned the employer will have no choice BUT to pay the adviser. That historic levels of remuneration for these plans will no longer be tenable is of course a moot point and I would have thought – about time too. For too long offices with a pretty scant proposition have relied on the inducements they have managed to pay to advisers to ensure they get a flow of business and I’m afraid Scottish Life fall well into that category.

    I know I will attract nothing but distain when I say I have never had a problem with the employer paying and this has been the case when I install individual PPs for the staff (when there is an employer contribution). Perhaps the people I deal with are more generous, but for those that like to watch the pennies, then no doubt they will claw back the fee from the next pay review.
    In the end it’s all about showing the employer how to save money as well as retain staff. In the right circumstances a pension for the employees can make the employer look good while at the same time save him money. (NI for a start!)

    However I will admit that I don’t deal with firms with more than 30 employees and I absolutely hate GPPs and NEST type schemes. These are one size fits all and provide scant advice or choice for the member.

  16. 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.”

    So Dale – they won’t benefit from a Workplace pension scheme that their employer will pay into for them, interesting! Is that just a Friends Life pension or anyones?

  17. Webb said: “Any provider thinking they should carry on business as usual with consultancy charging should think again.”
    Oh Steve is that like – Any government continuing the robbing of ex-pat pensioners should think again ?
    Get your own house in order and stop the freezing of the state pension worldwide. All of the pensioners HAD to pay their contributions and ALL should reap the benefit in the same way without exception. After all it is discrimination as you yourself said and has no place in today’s society. Ignoring the Charter of the Commonwealth and embarrassing her Majesty who signed it on your behalf. I don’t blame these others commenting here as they a valid grievance like the frozen pensioner has and they have to make a living like the pensioner wants to survive. . Don’tyerknow ?

  18. It frightens me how ignorant our Politian’s have become living in the Westminster bubble. Has Webb got nothing better to do than micro manage everybody’s business??

    Its like having Labour back in all over again.

  19. @Marty:

    “It would be interesting to see how fund value compares for a default fund after 15 & 20 years on a similar basis.”

    No-one pays into a pension for 15-20 years straight, that’s why initial and accumulation structures were scrapped.


    So Mr Webb’s employer can pay his solicitor fees, mtg arrangement fees and stamp duty and that’s OK, oh, and his cleaning bill for his home.

  21. Will Steve let all those who are due to retire prior to the new State Pension being introduced in 2016 get the new uplifted pension he is promising or will he just say ‘stuff you lot rules are rules and you only get it after that date’?

    Still I doubt Steve will be in Govt then.

  22. Quote – 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.”

    I find this statement irritating on 2 levels. If this is truly FL’s stance then perhaps they would revisit all their legacy book and re-price all the Schemes where post sales services are bundled into the AMC but the employee is not getting this level of agreed service…….No, ok then.

    Point 2. Whilst I am not a fan of consultancy charging as I don’t believe you can be certain the employee is getting value for money, I think its a stupid comment that infers an employee wont get any benefit from being put into a workplace pension scheme, or is this an “indirect” benefit?

  23. Who is going to tell the employer/employee the cost of going into NEST.
    NEST will charge:
    • an annual management charge (AMC) on the total value of a member’s fund
    each year of 0.3 per cent. On a total fund of £10,000, for example, a 0.3 per
    cent AMC would be £30
    • a charge of around 1.8 per cent on each new contribution into NEST, known as
    a contribution charge, until the set-up costs of the scheme have been met. If,
    for example, a total contribution including tax relief of £100 is made into a
    member’s retirement pot then 1.8 per cent, or £1.80, would be deducted and
    £98.20 would be invested.

    If you are in your 50s then you are paying the set up costs for everyone, what happened to the notion of no cross subsidies? Why is it OK for a company that the Government chooses to make money but everyone else is supposed to work for free?

  24. @ David 11.08
    Because it is a case of do as we say……

  25. I’ve had a response from the DWP to my open letter mentioned earlier on in the comments:

    Is it just me or are the DWP really that naive to think that employers will not need advice on what is a hugely complicated piece of legislation. I think the third from last paragraph really does sum up their naivete.

    Dear Mr Herd
    Thank you for your recent correspondence on consultancy charges, raising issues arising from Government policies which are the responsibility of this Department. Government Ministers receive a large volume of correspondence and they are unable to reply personally on every occasion. I have been asked to respond.
    The process of automatically enrolling millions of people into workplace pensions means that many are now beginning to save for their retirement for the first time. This is a once in a generation opportunity to prompt individuals to take personal responsibility for their financial security in later life. It is vital therefore that we ensure that people are enrolled in schemes with transparent and value for money charges.
    Over the past six months we have conducted a thorough review of the interaction between consultancy charging and automatic enrolment. This has involved discussions with all the major stakeholders, including a number of advisors ranging from one man firms to large employee benefit consultants.
    Following the review, the Minister for Pensions concluded that current measures to prevent advisers from deducting high consultancy charges from members’ pension pots are inadequate. In particular, the review identified concerns about the disproportionately negative impact that consultancy charges can have on lower earners and people who move jobs regularly. The overall conclusion was that there are insufficient market incentives to drive down costs and ensure that consultancy charges consistently represent good value for money for people who are automatically enrolled.

    We have therefore decided that consultancy charging is not an appropriate mechanism for use in automatic enrolment schemes and intend to lay regulations before Parliament as soon as possible to prevent their use in this context.
    Employers do not need to take advice in order to comply with their duties under the workplace pension reforms. The government has provided a low cost pension scheme (NEST) with a public service obligation to take any employer who wants to use it to comply with the duties. Furthermore, The Pensions Regulator provides tools and guidance to help employers comply with their obligations and is continually developing these based on feedback and market developments.
    Employers who do wish to take advice (and/or provide advice services to their workers) can pay an adviser directly through a fee.
    Individuals who wish to access individualised retirement planning advice will continue to be able to access this through IFAs as they do currently. They will also be able to use the Money Advice Service’s free retirement planning tools_
    Yours sincerely

    Goff Daft
    Head of the Correspondence Team

  26. A few months ago I showed an employer the article about SMEs not needing advice, to which she responded ” that is exactly why you are here ” After face to face meetings with every member there was full take up, as opposed to 25% with the current Stakeholder non commission scheme, and a small fee of £100 deducted from each plan for the cost of installation. Even then the father of the lowest paid member complained about the fee, he worked for HSBC!
    If I cannot even help employers with the cost of implementation by absorbing such a low fee level, then perhaps I should stay away from advising in this area, at least there is no advice liability.

  27. @Goff (must be a made up name for the surname, no one can be that daft)

    Simple then – no advice needed, job done. Over to Ma, the TPR and NEST they can help the employers.

    No need for the TPR to keep emailing me updates etc.

    Just a couple of questions: who was it that suggested IFA’s might like to give their advice for free on the NEST scheme if it doesn’t need any? Who pays for when it goes wrong?

  28. Answers to my previous two questions to save you looking:

    1. Nest managing director of customer and proposition Graham Vidler said it is encouraging advisers to help small and medium-sized businesses set up the scheme.

    When asked how advisers could charge for this “delegated access” service, Vidler said they could levy an upfront fee or offer it on a “break-even” or free basis as a loss leader and make money selling other services.

    2. Advisers & clients will pay.

    Goff should tell Graham that no advice is needed and he is just being daft.

  29. “It is vital therefore that we ensure that people are enrolled in schemes with transparent and value for money charges”
    Hmmm. So how come NEST appears to have at least one fund that invests in other funds with charges much higher than 0.3%, but which NEST says will be cross subsidised initially but may have to go up eventually if too much money goes in them?!
    Is that what they view as transparent?

  30. James Marchant 5th June 2013 at 9:07 pm

    @Greg Heath 09.04am – interesting comment you make about it being like having Labour back in power. Whilst in conversation about Steve Webb with Steve Bee a few years ago he told me that Webb is more left wing than the Labour party! In a nutshell then he doesn’t have anything better to do because as with all socialists he believes in controlling / dictating things from the centre.

  31. Anonymous | 5 Jun 2013 9:07 pm

    If you look at his history he is clearly a socialist.

  32. Harry Katz said

    “For too long offices with a pretty scant proposition have relied on the inducements they have managed to pay to advisers to ensure they get a flow of business and I’m afraid Scottish Life fall well into that category.”

    Given that Scottish Life stopped paying amc-base commission about five years ago, and keep winning major industry awards such as “Best Default Fund”, and Best Group Pension Provider” your comments are both inaccurate and worryingly out of date.

  33. This is kind of stuff Knighthoods are made of…..

  34. Russell Allan 8th June 2013 at 9:38 am

    Steve Webb is a clown – he makes the rules, makes a complete pigs-ear of it, a provider reads the rules and complies with them only to be called out by aforementioned Clown as skirting almost on the illegal. The phrase “stuff you, until it’s absolutely illegal” is inflammatory and obviously suggesting that Sc Life were skirting the law. The man is not fit for purpose, and despite all the talk recently there is STILL no answers to how NEST can get away with an up front charge taken from members pension pots. A hypocrite and a stupid one – a dangerous combination.

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