Aegon warns against DWP ban on legacy consultancy charging

Aegon’s regulatory strategy director has warned against the Department for Work and Pensions (DWP) extending its ban on consultancy charges to legacy agreements on auto-enrolment pensions .

Steven Cameron told Money Management that the move, which would affect pension schemes set up prior to Steve Webb banning consultancy charges, could unsettle employers.

“My view is that retrospective action which might unsettle good arrangements and provide good pensions would be a dangerous step to take,” he said.

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“If an employer has, in good faith, set up a pension scheme – and in many cases this is way ahead of the auto-enrolment staging date, voluntarily for their employees – using consultancy charges, which was an FCA-mandated approach, then we believe it would be wrong to unsettle or penalise employers for taking that voluntary action.”

He added that Aegon does not have many schemes that were set up on a consultancy charging basis so the suggestion would be relatively low-impact for the company if it became policy, but was firm that retrospectively applying the ban would be a bad idea.

Pensions minister Steve Webb enacted new regulations which stipulate that advisers must not be paid consultancy charges on auto-enrolment pension schemes from the schemes themselves. This applies to all business from when the law came into force on September 14, but also any agreements made since the initial announcement of the ban on May 10.

The new threat is that the DWP may apply the law retrospectively to agreements made even before the proposal was made in May. It may mean advisers having to negotiate new agreements for payment with employers, since those working under a consultancy charging basis would still need to receive payment.

How much of a problem this will pose will depend on the wording of any charging agreements. If it is stipulated that the charge will come from the fund, further negotiations will be needed if a ban is enforced. However, advisers are better protected if the contract states they will be paid but does not specify how.