Not a single employer enrolling through Legal & General chose to use the consultancy charging model, the firm has said.
Adrian Boulding, pensions strategy director at L&G, told Money Management that although many employers initially liked the idea of consultancy charging, none chose to implement the model after seeing the impact on ‘lower value’ employees.
“We haven’t established any auto-enrolment schemes on a consultancy charge basis,” said Tony Filbin, managing director of workplace savings at L&G, despite the company allowing it as an option.
L&G said it had auto-enrolled 250,000 employees by the end of February this year, with large employers making up much of the business.
Mr Boulding said while a consultancy charging model appealed to employers on the surface and was good value for many employees, the effect on “employees on the periphery” – such as low earners and transient workers – posed such a bad deal for them that employers decided not to go ahead with the charging structure.
The comments follow a statement from pensions minister Steve Webb that consultancy charges for auto-enrolment pensions will be banned.
L&G has “changed its spots” on consultancy charging as a result, Mr Boulding said, after originally being a supporter of the model.
The minister’s announcement therefore will not have a direct impact on existing business, Mr Filbin said.
Views have been split on consultancy charging, with some arguing that allowing it is unfair on employees and others claiming that banning it puts an unfair financial burden on small employers. L&G’s comments follow Scottish Life’s saying the timing of the ban was “beyond belief”.
