Advisers – and providers – have been left divided following news that the government plans to ban consultancy charging on auto-enrolment pensions.
The announcement, written in a parliamentary statement by Steve Webb on 10 May 2013, comes almost six months into the implementation of the RDR – timing branded by Scottish Life as “almost beyond belief”.
Many providers have stated their support for consultancy charging, only to be disappointed with the U-turn, particularly since it changes the playing field after they have already developed consultancy charge-based systems.
The basis for the ban is that it is unfair for members of the scheme to bear the cost of advice provided to the employer. Opponents of the ban say the employer should not have to pay when the employee will ultimately benefit.
The argument becomes more difficult with smaller firms – of which there are many more than large companies, since the cost of advice will be proportionately higher per member.
A lack of advice for smaller firms has previously been highlighted; now there are concerns that, for those who can find an adviser, paying for help will become more onerous.
Lisanne Mealing, managing director of Surrey-based MDM Associates, said consultancy charging will lead to a lack of advice for firms that desperately need it and extra costs for hard-pressed companies.
“Cashflow is such a big issue for small private firms and so is personnel resource,” she said. “Not only will they have to try to attack auto-enrolment on their own, the huge number of firms with staging dates in summer next year means that in all probability there will be no-one available to provide help.
“Extra cost for contributions and advice now has to be swallowed completely by them, plus, potentially, penal fines.”
