Which? has written to pensions minister Steve Webb urging the Government to ban consultancy charging for automatic enrolment.
Consultancy charging was devised by the FSA to allow advisers to charge employees’ pension pots for advice given to the employer.con
However, the future of consultancy charging for auto-enrolment is unclear. In November, pensions minister Steve Webb wrote to the Association of British Insurers saying the DWP was launching an “urgent review” into the charging method and is considering banning it altogether.
In January, Which? conducted a mystery shopping exercise which revealed insurers are willing to accept consultancy charging fees of up to £450 per member for the first year.
Which? followed this up in March with a survey of 745 UK employed adults, aged under the state pension retirement age and earning over £8,105.
The survey found 63 per cent of people who are not currently contributing to a workplace pension and are eligible for auto-enrolment would be more likely to opt-out if they were hit by high consultancy charges.
In a letter to Webb, Which? chief executive Peter Vicary-Smith says: “Consumers have absolutely no power to reject these charges. They will be automatically enrolled into these schemes and if they believe the charges are excessive their only option is to opt-out and lose the opportunity both to contribute to a workplace pension and receive employer contributions.
“Which? believes urgent action is necessary to protect consumers and ensure that they get a fair deal. We hope your review will result in a ban on the practice of member-borne consultancy charges.”
Hargreaves Lansdown head of pensions research Tom McPhail says: “If we ban consultancy charging there is a risk small firms that cannot afford to pay for support from an adviser will not engage.”