The Government today announced measures that it is hoped will tackle some of the high charges faced by pension savers in the workplace.
Under current rules consultancy firms are able to offer advice to employers and take fees for such advice directly from pension funds. The ban will prevent such fees being taken from workplace pension pots and will apply to personal and occupational schemes offered in the workplace.
Pensions Minister Steve Webb said:
“With millions of people taking up pension saving for the first time under automatic enrolment, we have to give people confidence that they will get good value for money.
“That is why we are banning consultancy charges, where scheme members end up paying for advice given to their employer.”
A ban on consultancy charges for auto-enrolment schemes could be particularly good news for those who regularly move from job to job, who may more severely be affected by such charges.
Richard Lloyd, Which? executive director said
“This is a big win for millions of consumers with auto-enrolment pension schemes. It is absolutely right to ban these unnecessary and unfair charges that meant people’s retirement savings were going straight into consultants’ pockets rather than pension pots.”
The phasing in of auto-enrolment begun last October and is designed to encourage saving for retirement.
The Government also announced plans for a consultation in the autumn, to follow up on an investigation by the Office for Fair Trading into the state of workplace pensions.
“The OFT is investigating the whole workplace pensions market and we will act promptly and vigorously later this year in the light of their findings.”
The consultation is likely to set out proposals such as a cap on default fund charges levied through Defined Contribution pension schemes.