Advocate: Consultancy charging ban

YES: Jon Dixon, corporate advice manager, Chase de Vere

It is widely accepted that employees in general aren’t saving enough to fund their own retirements. We fully support the implementation of auto-enrolment, which will go some way to addressing this.

However, auto-enrolment alone won’t be enough to provide a comfortable standard in retirement. Assuming 5 per cent annual growth, somebody earning an average salary investing over a 46-year period into an auto-enrolment pension – at minimum contribution levels rising from 2 per cent to 8 per cent in line with legislation – would receive a pension income of less than £500 each month in today’s terms. For shorter periods this amount will be considerably lower.

We need to engage with employees and help build confidence in workplace pensions. To achieve this, schemes must have low and transparent charges and be focused on delivering the best outcomes for employees.

While we understand that some smaller employers might struggle to meet the expense of auto-enrolment implementation and compliance, we don’t accept that putting this cost burden on employees is the right solution.

Instead, the pensions and corporate advice industry needs to step up and offer solutions which are cost effective for employers and beneficial to employees, rather than the consultancy charging approach where employees often pay too much and get too little in return.

NO: Chris Budd, managing director, Ovation Finance

I write as both the principal of an advisory firm and an employer. This issue is not about how advisers get remunerated, but costs to businesses. At a time when many companies are having financial difficulties, auto-enrolment is going to be a real problem to many employers.

State pension provision is being eroded at the same time as businesses and individuals are being forced to pay into private pensions. Businesses get no direct benefit and are effectively being asked to help the government privatise the state pension scheme.

Auto-enrolment is, I believe, a good thing; something has to be done to help solve the major demographic problem facing the nation. But it is also an imposition of red tape and cost to businesses. And if businesses also have to pay for the cost of advice and support, many will simply not bother.

What will be the effect of this? There is the obvious danger that many will not follow the procedures correctly. But pensions should be explained properly and staff should have the chance to ask questions, to understand what they are being forced into.

Commissions were previously too high, but I see no harm in an appropriate fee being funded by the people who will benefit most from the advice: the staff. My feeling is that, for the sake of adding a few basis points onto the annual management charge, the cost of implementation should be borne by the scheme members.