Pensions minister Steve Webb MP has dismissed claims from some industry commentators over the potential deleterious effects of the government’s move to ban consultancy charging, saying that the auto-enrolment regime has been set up such that “nobody has to pay for advice”.
Speaking at the launch of the Scottish Widows UK Pensions Retirement Report 2013, Steve Webb, pensions minister, was quizzed by a representative from KPMG on how small and ‘micro’ employers were going to find funds to pay directly for advice.
KPMG said that the “elephant in the room” is that as there is no new money in a recession, firms that would otherwise be willing to pay may be unable to do so and thus may be precluded from seeking valuable advice on setting up a pension scheme for the first time.
But Mr Webb hit back, saying: “Why do they need advice?”
He claimed that the government has “legislated for quality” and has ensured that employees cannot be auto-enrolled into a scheme that is not of sufficient quality. He explained that the government-backed National Employment Savings Trust is a quality default option and said there are also other “quality” providers that are well-established in the market.
Mr Webb said: “If they want to pay for advice and wish to pay for advice and do something better and different then that’s fine, but nobody has to pay for advice and we need to make sure that people who do this in an unadvised way get good outcomes.”
Mr Webb also defended the move to ban charges, saying that a softer option such as demanding clarity over charges would not be an end in itself.
He said: “I am not someone that thinks clarity of charges gets you very far, frankly. The difference between 0.5 per cent and 0.7 per cent... is that small or large? So clarity is great, transparency is great ,but it doesn’t get you very far.”
Mr Webb also launched an attack on a provider, known to be Scottish Life, for continuing to write business based on consultancy charging despite the intended ban on it, as reported by FTAdviser sister title Money Management.
He said: “A provider says ‘stuff you, until it is absolutely illegal, not only will I carry on with pipeline business, I will write new business’,” said Mr Webb.
The minister signalled his disapproval of this approach, saying the consultancy charging episode “makes me realise that certain parts of the industry just haven’t learnt anything”.
“Get with the programme, guys,” he added.
