It was bad enough that AE was made much more expensive for employers when the pensions minister suddenly banned consultancy charging earlier this year, but, unbelievably, the Office of Fair Trading is jumping on the bandwagon and suggesting banning commission-based GPP schemes from the staging date.
They seem to have the same misunderstanding as the minister – that advice is not needed, and all an employer needs to do is go on the internet to Nest and all their AE compliance worries are solved.
Imagine an employer who has done the decent thing and always provided a GPP to his employees. Let us say it pays commission but has a fairly typical 1 per cent AMC (not forgetting this is well under the stakeholder charge cap).
Our employer friend has – up to now – at least had some of his AE advice and arrangement costs met by commission, but he now faces the extra costs of AE, plus the possibility that the OFT will make him pay for a new pension scheme at his staging date.
And there seems to be no comprehension that an employer could be forced to pay to replace a low charging commission-based scheme with a higher charging GPP, plus any adviser charges, nor that the existing pension scheme could be rather better quality.
Worse still, with schemes passing their staging dates every month, and insurance companies only willing to accept new schemes with plenty of notice, the employer could be left floundering for a replacement scheme and unable to auto-enrol – even if he were willing to use Nest (and in our experience, many do not wish to).
A body set up to ensure fair trading is proposing something that could be the opposite for the poor employer.
The advice and insurance industry needs to wake up to this highly unnecessary and destabilising threat from the OFT, remind it that the FCA is the regulator, and that employers already have the right to change pension scheme and to use or not use a professional adviser.
Mark Osland
Director, Formula
South Croydon
