The industry has brought the ban on consultancy charging for auto-enrolment on itself by missing the opportunity to negotiate a compromise, Hargreaves Lansdown said.
Speaking to FTAdviser, Tom McPhail, head of pensions research at Hargreaves, said that although some companies have been trying to do the “right thing”, the industry has collectively failed to deliver the outcome that pensions minister Steve Webb was looking for “so he has had to force it”.
The move will mean consultancy charges, which were an attempt to apply the Retail Distribution Review commission ban to the sector by allowing advisers to take an agreed fee directly from the pension scheme, will be banned on all “occupational and personal pension schemes”.
Mr McPhail said Hargreaves has been helping corporate clients who have a few hundred employees through auto-enrolment, and that the majority will hit their staging date in the either now or the next few months.
He said: “These are the kind of businesses where it’s been reasonably straightforward to work out an arrangement for them so I think the pressure will come in terms of the consultancy charging issue further down the line in 2014/15 when we get down to the much smaller employers.”
However, Mr Webb recently criticised a pension firm understood to be Scottish Life for continuing to write business based on consultancy charging despite an intended ban.
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”.
Mr Webb also previously said that the government intends to consult in the autumn on plans to cap the charges for pensions advice. The price cap is currently unknown but industry commentators say it will certainly go ahead.
Mr McPhail said: “Webb was right do what he did and he had to do it. I also think looking ahead is the fact that we have a price cap coming.
“Effectively what we will see is a price ceiling and whatever you do within the scheme, whether it’s actuarial work or consultancy work or the administration or whatever, it all has to be paid for out of that price cap and that’s fine and that I think it will go a long way towards assuaging concerns about people possibly being ripped off with their pension.
“The interesting challenge from here is not to throw the baby out with the bathwater and have a sensible conversation about that price cap.”
Toby Strauss, chief executive of Scottish Widows, said: “In our view consultancy charging could only work under strict safeguards such as the ones Scottish Widows proposed earlier this year.
“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.”
