Personal PensionJan 26 2016

DWP pushes ahead with pension commission ban

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DWP pushes ahead with pension commission ban

In terms of Option B, almost all providers who responded felt they were best placed to prevent and remove charges on members used to recover the costs of commission paid to advisers in occupational schemes.

However, while the DWP acknowledged that its original proposal may result in additional burdens for some providers, the complexity of making regulations to ban existing commission arrangements means that they are unlikely to be resolved in time to make and lay regulations to come into force on 6 April.

Jamie Jenkins, head of pensions strategy at Standard Life, explained that this consultation seeks to bring trust-based schemes in line with their contract-based counterparts in banning commission where the scheme is being used for auto enrolment.

“Enforcing the rules is slightly more difficult due to the additional role of trustees, who are not usually party to the contract with the adviser. In practice, however, there were few trust-based schemes set up to pay commission, and we would expect all providers were preparing to remove it anyway.”

The government also stated that it sought to strike a balance between making effective regulations that protect members, while minimising regulatory burdens on industry.

“In line with the approach taken by the Financial Conduct Authority, we do not propose stopping service providers from using member-borne charges to recover the cost of initial commission paid before the regulations come into force,” read the consultation.

“In addition, we will not regulate for providers to reduce member-borne charges when existing commission arrangements are removed. However, if we see that members are not benefitting from the removal of commission arrangements we will take action.”

Steven Cameron, regulatory strategy director at Aegon, agreed that it’s right for trustees to be given responsibility for notifying the provider if the arrangement they are administering is linked to a scheme being used for auto-enrolment.

“It’s also right that providers then take responsibility for bringing the scheme into line with the commission ban. In most cases, the key driver for change is complying with the charge cap which in most cases would have required commission to be removed in any case.”

peter.walker@ft.com

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