Sir Steve Webb has said if MPs decide contingent charging "has to go" his preference would be "to look at getting the charge revenue from the defined benefit scheme".
Speaking to Money Management's Craig Rickman, the director of policy at Royal London explained: "In other words you'd say to the member, 'if you want transfer advice, you can have it. It is a fixed fee'.
"Say it's [a] £200,000 transfer, the advice is £4,000 – 2 per cent, say. So if the transfer goes ahead, the £4,000 comes out of the transfer value and, if it doesn't, you lose 2 per cent of your DB rights.
"That seems liveable with and that way people who don't have a huge amount in the bank can still access quality advice."
In January this year, MPs launched an inquiry into contingent charging on defined benefit (DB) transfers, following a report by the committee into the financial advice given to members of the British Steel Pension Scheme.
But Mr Webb said: "I think it's simplistic, if not wrong to say, if we just fix contingent charging none of this would have happened. I think that is nonsense.
"It was a complicated combination of circumstances that went wrong and there isn't a quick, simplistic fix to this problem."
He explained there were more than 100,000 members of the British Steel Pension Scheme – "44,000 members could get a transfer value, of whom 8,000 transferred".
He added: "It is worth getting a sense of scale here."
Mr Webb said of the recent Financial Conduct Authority plan to introduce four default investment pathways as part of its Retirement Outcome Review, it was "a modest step in the right direction".
"What's reassuring from an adviser point of view is that the FCA almost said at the start of their interim report on the Retirement Outcome Review, 'we're not even going to look at advised drawdown'," he said.
"So immediately that's a message that says to people, advice is an important thing. These are big, life changing decisions."
He added he was "pleased the FCA didn't go for a crude charge cap".
Frank Field MP, chairman of the work and pensions select committee, had previously proposed a 0.75 per cent charge cap.
But Mr Webb said: "It's just a number plucked from the air and that would have been a very crude intervention."
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