Which? has piled pressure on the Government to take action over consultancy charging after a mystery shopping exercise revealed insurers are willing to accept fees of up to £450 per member for the first year.
Consultancy charging is a concept devised by the FSA to allow advisers to charge employees’ pension pots for advice given to the employer.
In June, the FSA published guidance saying it will not allow a consultancy charge to reduce the value of a member’s pension contribution below the auto-enrolment minimum of 8 per cent.
The future of consultancy charging for automatic enrolment was thrown into doubt in November when 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.
The DWP will make a final decision in the spring.
Which? conducted a mystery shopping exercise in January during which it posed as a consultant and approached five insurance companies to set up a pension scheme for an employer. Which? asked each insurer whether a certain level of consultancy charge was acceptable.
One provider did not object to a fee agreement of £400 from each scheme member, spread over the first year, and ongoing charges of £5 per member.
Another was willing to accept a consultancy charge of £450 per member, plus 7.5 per cent contribution charge for the first five years.
Which? says only one insurer it spoke to mentioned the FSA guidance on minimum contributions.
An Association of British Insurers spokeswoman says: “Consultancy charging needs to provide a tangible benefit to scheme members and we are in discussions with our members about this. We have informed the minister that we will respond with our assessment shortly.”
Rowley Turton director Scott Gallacher says: “Charging £450 per member would be obscene and this clearly raises questions about the protections that are in place to stop people levying huge fees.”