The legislation will allow the government to take action against “high and inappropriate” consultancy charges, which pensions minister Steve Webb said could have a disproportionately negative impact on workers who move jobs regularly.
The government will consult later this year on the introduction of a cap on default charges for defined contribution schemes.
Mr Webb said: “With millions of people taking up pension saving for the first time under auto-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. In addition the Office of Fair Trading is investigating the whole workplace pensions market and we will act promptly and vigorously later this year in the light of their findings.”
Ros Altmann, independent pensions consultant, said the measures represented “significant improvements” in pension fund protection for workers, adding: “Consultancy charging is a huge scandal in the making and it is entirely right that this practice should be outlawed.
“Millions of workers are being auto-enrolled in to pension schemes at the moment, but the regulators were allowing their pension funds to be raided to pay fees to consultants who advised their employers on which scheme to choose for auto-enrolment. Although the workers foot the bill, they receive nothing in exchange.”
The Bill contained provisions to implement the new single-tier pension and accepted the work and pensions select committee’s recommendations that it should start in April 2016.
Committee chairman Dame Anne Begg said: “We welcome the introduction of the single-tier state pension, however we expressed some concerns which have not been fully addressed by the government, including the starting rate for the pension, the differential between the level of the pension and means-tested pension credit, and derived rights to a state pension.
“The last of these will particularly affect a number of women quite close to state pension age.”
Key points • Single-tier pension to be implemented in April 2016. • Framework for the regular review of state pension age to be bought forward. • Provision for a system of automatic transfers for small pension pots. • A new statutory objective for The Pensions Regulator. |
Industry views
Camilla Barry, partner of the pensions team for London-based law firm Macfarlanes, said: “The wording for The Pensions Regulator’s statutory objective is much stronger than the wording used for the consultation in January and will help redress the balance between the interests of defined benefit pension scheme members and jobs.”
Joanne Segars, chief executive of the National Association of Pension Funds, said: “Excessive consultancy charges can be a serious problem and we are concerned about them, but a blanket ban is too simplistic. Employers should not be allowed to pass on charges for advice that does not directly benefit the saver, such as guidance on complying with auto-enrolment laws. But sometimes savers can benefit from the advice that comes with these charges. They may find that their pension is better governed and that they get stronger communications about their savings.”
Adviser view
Tom McPhail, head of pensions research for Bristol-based Hargreaves Lansdown, said: “The introduction of a charge cap is an important step in restoring confidence in pensions and in long-term saving.
“The majority of pension plans already deliver excellent value for money to their members. However for as long as there are exceptions, such as high upfront consultancy charges or excessive ongoing fees, some people will be deterred from investing for fear they will be ripped off.”